There are warnings of serious hurdles ahead including the “no-deal” Brexit for the United Kingdom, a deeper-than-expected slowdown in China and the US-China trade war.
The International Monetary Fund (IMF) has warned that the world is at risk of a sharp downturn, as the global economy is weakening at a faster rate than expected, says a report in news.com.au.
The IMF has pared down its growth forecast from 3.7 per cent in 2018 to 3.5 per cent in 2019, the report says.
The IMF report has warned of a number of flashpoints that could lead to even lower growth trajectories across the world.
“A range of triggers beyond escalating trade tensions could spark a further deterioration in risk sentiment with adverse growth implications, especially given high levels of public and private debt,” it said.
The triggers pointed out by IMF include a “no-deal” Brexit for the United Kingdom and a deeper-than-expected slowdown in China.
Notably, China has reported that 2018 has seen the slowest economic growth in almost three decades. In a sign of the its struggle ahead, growth in the last three months of the year in China was at 6.4 per cent that matched a low seen during the global financial crisis 10 years ago.
The IMF had pared down its forecasts for both this year and next were previously partly because of the negative impacts of the US-China trade war.
However, Chinese President Xi Jinping and US President Donald Trump have agreed to a three-month ceasefire on escalating the trade war, as its top negotiators are set to meet in Washington at the end of January, with a March deadline for a deal looming ahead.
The reports notes other key contributors to the downturn including the introduction of a new fuel emissions standard in Germany, a deeper-than-expected economic contraction in Turkey and concerns over a growing sovereign debt crisis in Italy.
The report quotes Gita Gopinath, the new IMF chief economist, as saying that “the global expansion is weakening and at a rate that is somewhat faster than expected”.
“The downward revisions are modest, however we believe the risks to more significant downward corrections are rising,” Prof Gopinath said.