Global economy is set to expand at the slowest pace in a decade this year amid weak manufacturing momentum, and rising trade and geopolitical tensions, the International Monetary Fund said Tuesday.
The global lender cut the growth forecast for this year to 3 percent from 3.3 percent projected in April, in its latest World Economic Outlook.
The pace of growth this year will be the lowest since 2008-09 global financial crisis, the report said.
The projection for 2020 was lowered to 3.4 percent from 3.6 percent forecast in April.
“The global economy is in a synchronized slowdown,” IMF Chief Economist Gita Gopinath said.
“Growth continues to be weakened by rising trade barriers and increasing geopolitical tensions.”
The IMF estimates that the US-China trade tensions will cumulatively reduce the level of global GDP by 0.8 percent by 2020.
The expected recovery in global growth in 2020 “is not broad-based and remains precarious”, Gopinath said.
Further, the IMF said without the ultra easy monetary policy in several advanced economies, global growth would be lower by 0.5 percentage points both this year and next.
However, the lender also warned about the financial risks that stem from keeping interest rates low for a long time.
“There is a significant risk of financial vulnerabilities growing, which makes effective macroprudential regulation imperative,” the IMF said.
“Countries should simultaneously undertake structural reforms to raise productivity, resilience, and equity,” Gopinath said.
“There is no room for policy mistakes and an urgent need for policymakers to cooperatively deescalate trade and geopolitical tensions,” the economist added.
Advanced economies are forecast to grow at 1.7 percent both this year and next. Growth in the US is projected to ease to 2.4 percent this year and further to 2.1 percent next year.
In the euro area, growth is seen slowing to 1.2 percent this year and then to rebound to 1.4 percent next year. In the UK, a similar trend is projected.
China’s growth is forecast to slow to 6.1 percent this year and to 5.8 percent next year. India’s growth is seen slowing to 6.1 percent this year, but rebound to 7 percent in 2020.
The material has been provided by InstaForex Company – www.instaforex.com