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IMF downgrades growth outlook

Lachlan Maddock
— 1 minute read

The International Monetary Fund (IMF) believes that global growth will increase sluggishly but remains vulnerable to geopolitical and climate crises.

Global growth will rise from 2.9 per cent to 3.4 per cent in 2021, a downward revision of 0.1 percentage points, and there are few signs of a decisive turning point in the available macro-economic data. 

However, market sentiment has been boosted by tentative signs that there may soon be improvement in manufacturing and trade, as well as breakthroughs in the US-China trade war and the alleviation of fears about a no-deal Brexit. 

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But continued growth depends heavily on averting the flashpoint crises that have so far dominated the first month of 2020. 

“Rising geopolitical tensions, notably between the US and Iran, could disrupt global oil supply, hurt sentiment, and weaken already tentative business investment,” the IMF wrote.

“Moreover, intensifying social unrest across many countries – reflecting, in some cases, the erosion of trust in established institutions and lack of representation in governance structures – could disrupt activity, complicate reform efforts and weaken sentiment, dragging growth lower than projected.”

Any escalation on these fronts could expose the financial vulnerabilities that have built up over years of low interest rates and poor consumer confidence, while weather disasters can impose severe humanitarian costs and livelihood loss across multiple regions. 

That – combined with a potential escalation of America’s trade disputes – could roil the global economy and see a much slower recovery.

 

IMF downgrades growth outlook
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