IMF Predicts Modest Global Growth; US GDP To Fall In The Next 2 Years

IMF - QUARTERLY UPDATE, JANUARY 2020

The latest IMF economic outlook – Tentative Stabilization, Sluggish Recovery – shows global growth prospects downgraded from the October WEO Outlook over the next two years. Global growth is now projected at 3.3% in 2020 (down from a prior 3.4%) and 3.4% in 2021 (down from 3.6%).

According to the report, 

'The downward revision primarily reflects negative surprises to economic activity in a few emerging market economies, notably India, which led to a reassessment of growth prospects over the next two years. In a few cases, this reassessment also reflects the impact of increased social unrest.’

  • US growth is expected to moderate from 2.3% in 2019 to 2% in 2020 (down 0.1%) and decline further to 1.7% in 2021.
  • Euro Area growth is expected to pick-up from 1.2% last year to 1.3% this year (down 0.1%) and to 1.4% in 2021.
  • UK growth is projected to stabilize at 1.4% in 2020 and to nudge marginally higher to 1.5% next year.
  • Japan’s growth rate is projected to fall from 1% in 2019 to 0.7% in 2020 (0.2% higher) and then decline further to 0.5% in 2021.
  • Chinese growth is estimated at 6.1% in 2019, 6.0% in 2020 and 5.8% in 2021.

The report adds that the balance of risks to the global outlook remains ‘on the downside’ but less skewed towards adverse outcomes than in the October report.

The moderation in US growth reflects a return to a neutral stance ‘and anticipated waning support from further loosening of financial conditions.’

Downside risks mentioned in the report include rising geopolitical tensions, intensifying social unrest across regions, higher tariff barriers/further deterioration in economic relations between the US and its trading partners, weather-related disasters and a widespread tightening of financial conditions that would expose financial vulnerabilities ‘built up over years of low-interest rates.

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