IMF issues warning over no-deal Brexit and Trump’s trade war as it slashes global growth forecasts
The International Monetary Fund has cut its global growth outlook and turned up the volume of its warnings about the negative impact of Donald Trump’s trade war and a no-deal Brexit.
On Monday the multilateral body, whose managing director is Christine Lagarde, reduced its world GDP expansion outlook for 2019 to 3.5 per cent, down from the 3.7 per cent it pencilled in only in October.
It also shaved its 2020 forecast from 3.7 per cent to 3.6 per cent.
“The main shared policy priority is for countries to resolve co-operatively and quickly their trade disagreements and the resulting policy uncertainty, rather than raising harmful barriers further and destabilising an already slowing global economy,” the IMF wrote in its updated World Economic Outlook.
It also warned about the potential impact of the UK leaving the European Union with no deal.
“A range of triggers beyond escalating trade tensions could spark a further deterioration in risk sentiment with adverse growth implications, especially given the high levels of public and private debt,” it said.
“These potential triggers include a no-deal withdrawal of the United Kingdom from the European Union and a greater-than-envisaged slowdown in China”.
Separately on Monday China reported its weakest annual growth in 2018 since 1990 at 6.6 per cent.
The IMF is forecasting China’s growth rate to slip to just 6.2 per cent in 2019 and 2020.
In November, the IMF warned that the UK economy could face a long-run hit of up to 8 per cent of GDP in the event of a no-deal Brexit
Global slowdown
Its latest UK forecast, which assumes a smooth Brexit, is for growth in 2019 of 1.5 per cent, followed by 1.6 per cent in 2020 (the latter up from 1.5 per cent in October).
The biggest downgrade was for Germany, which seems to have only narrowly avoided recession in the final quarter of 2018. The growth projection for 2019 was cut from 1.9 per cent to 1.3 per cent.
The 2019 outlook for Italy, which has recently emerged from a budget standoff with Brussels, was also slashed from 1 per cent to 0.6 per cent.
Gita Gopinath, the IMF’s chief economist, said the the cyclical upturn which lifted the economy in 2017 seemed to be weakening faster than the fund previously expected.
“While this does not mean we are staring at a major downturn, it is important to take stock of the many rising risks,” she said.
