As emerging markets falter, IMF slashes forecasts

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January 21, 2020

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As emerging markets falter, IMF slashes forecasts

Source: Agencies | 00:05 UTC+8 January 21, 2020 |

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THE International Monetary Fund yesterday trimmed back its 2020 global growth forecasts due to sharper-than-expected slowdowns in India and other emerging markets but said a US-China trade deal was another sign that trade and manufacturing activity may soon bottom out.

The IMF said global growth would reach 3.3 percent in 2020, compared to 2.9 percent in 2019, which was the slowest pace since the financial crisis a decade ago. Estimates for both years were cut by 0.1 percentage point from forecasts made in October.

Growth will improve slightly to 3.4 percent in 2021, but that estimate, too, was cut by 0.2 percentage point from October, the lender said.

The reductions reflect the IMF’s reassessment of economic prospects for a number of major emerging markets, notably India, where domestic demand has slowed more sharply than expected amid a contraction of credit and stress in the non-bank sector.

The fund said that an easing of tensions between the United States and China, which had stunted GDP growth in 2019, had boosted market sentiment, amid “tentative” signs that trade and manufacturing were bottoming out.

“These early signs of stabilization could persist and eventually reinforce the link between still-resilient consumer spending and improved business spending,” the IMF said. The fund has cited uncertainty over tariffs and its negative effects on business investment as the biggest factor in limiting growth.

The fund’s cautious outlook assumes that there are no additional flare-ups in US-China trade tensions, and that Britain executes an orderly exit from the European Union at the end of January.

The IMF upgraded China’s 2020 growth forecast by 0.2 percentage point to 6 percent because the US trade deal included a partial tariff reduction and canceled tariffs on Chinese consumer goods that had been scheduled for December.

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As emerging markets falter, IMF slashes forecasts

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