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IMF cuts global growth forecast

January 21, 2020

Despite a moderate pickup in growth, the International Monetary Fund has said uncertainty in US-China trade tensions, along with sluggish growth in India, will put a drag on the global economy in 2020.

IMF chief Kristalina Georgieva speaks ahead of the World Economic Forum in Davos
Image: Reuters/D. Balibouse

The International Monetary Fund (IMF) has said that although a global economic slowdown is easing, recovery will be sluggish moving into 2020.

In the latest update to its World Economic Outlook, released Monday, the IMF lowered its global growth estimate for 2020 to 3.3%, 0.1% lower than the previous report released in October.

Nevertheless, the IMF numbers for 2020 indicate a modest increase in growth compared to 2019, which saw the global economy grow by 2.9% 

The forecast comes a day before political and corporate leaders gather for the annual World Economic Forum in Davos, Switzerland.

Read moreUNDP head: 'The entire economy thrives on the destruction of nature'

Uncertainty the 'new normal'

Presenting the revised numbers in Davos, IMF managing director Kristalina Georgieva said data suggests positive trends in international trade and industrial output.

"After a synchronized slowdown in 2019, we expect a moderate pickup in global growth this year and next," Georgieva told a news conference.

Global economic growth chart from 2019

However, the IMF chief warned that the global economic growth in 2020 is still vulnerable to factors like political protests in numerous countries, the recent tensions between the US and Iran and the ongoing trade war between Washington and Beijing.

"We are all adjusting to live with the new normal of higher uncertainty," she said. "We are already seeing some tentative signs of stabilization but we have not reached a turning point yet."

India slow, US and China 'unresolved' 

The IMF said its projections depend on "avoiding further escalation" in an ongoing "unresolved" economic dispute between the US and China.

President Donald Trump signed a deal with China last week that eases tension in the short term but leaves tariffs in place on two-thirds of Chinese goods imported to the US. "Trade truce is not the same as trade peace," Georgieva Friday, commenting on the deal. 

Read moreCould the trade war future mean choosing China or the US?

"Policy missteps at this stage would further enfeeble an already weak global economy," the IMF said in the quarterly report.

A projected slowdown in India is also creating a global drag on growth, and the IMF said the Indian slowdown "accounts for the lion's share of the downward revisions."

Georgieva said India struggles with declining consumption and investments, budget deficits and delays in making structural reforms. 

wmr/cmk (AFP, dpa)

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