Global growth expected to slow in 2019 according to the IMF
According to the latest World Economic Outlook forecasts of April, the global economy is expected to grow by 3.3% in 2019, down by 0.2 percentage point (pp) from January's forecast (-0.4 pp lower than last October’s forecast), after the +3.6% achieved in 2018. Virtually all countries and regions have seen their growth forecasts lowered: United States, Eurozone, United Kingdom, Japan, Canada, Latin America, Middle East, etc. The slowdown is now synchronized affecting “70% of the world economy,” said the IMF chief economist Gita Gopinath. In the United States, where growth is expected to fall to +2.3% (-0.2 pp) after +2.9% last year, the institution notes that the effects of measures to stimulate the economy are fading away. In the Eurozone, the confidence of households and businesses has eroded. Germany, whose growth could lose 0.5 pp to +0.8%, sees the production of its automotive sector strongly disrupted by new pollution emissions standards. In Italy, where growth could fall to +0.1% (-0.5 pp), investments have also fallen. The United Kingdom is facing its difficult exit from the European Union., and its economy is expected to fall to +1.2% (-0.3 pp). In Latin America, the growth of the second-largest economy, Mexico, was sharply down (-0.5 pp) to +1.6%, “reflecting the changes in policy perception” of the new government, notes the IMF. Argentina, another major economy in the region that has obtained a program of financial assistance from the IMF, will remain in recession in the first half before an expected recovery in the second half thanks to a rebound in agricultural production. Venezuela, ravaged by a political and economic crisis, continues to sink into the recession that could reach -10% in 2020, “a significant weight for the region,” the IMF admits.
While the IMF does not see a global recession in the short term, “many economies are not resilient enough,” warned Christine Lagarde, urging countries to prepare for the next recession by erecting fiscal barriers of protection and adopting necessary reforms while the economy is still doing relatively well. What is certain is that the world economy is slowing down and that is normal after one of the longest periods of economic expansion, especially in the United States. But growth through debt should not hide the reality. This time, the slowdown and thus the recession could be hard and globally synchronous. The affected countries’ creditworthiness would then be undermined in the coming years.
Julien Moussavi, Head of Economic Research
Source: Beyond Ratings, IMF