Global growth is increasingly sluggish, and the IMF is urging countries to resolve trade and technology conflicts to boost growth, the Fund’s chief economist said Monday in Washington, D.C.
The IMF released its July update to the World Economic Outlook, which forecasts global growth, trade and inflation from Santiago, Chile Tuesday (July 22).
“Global growth remains sluggish and we are revising down growth for 2019 to 3.2% and for 2020 to 3.5%. These are modest revisions, but they come on top of more significant revisions done in the recent past,” said Gopinath in remarks taped before the report was unveiled.
“Going forward there are significant downside risks to the outlook. Some of the main ones are an escalation in trade tensions or in technology tensions. A change in financial risk sentiment. It is therefore very important for countries to cooperatively work together to resolve their disagreements, especially on the trade and technology front. Because that would be important for supporting growth going forward,” said Gopinath.
The report found that total international trade is sliding sharply, with growth at its lowest point since 2012. The forecast shows a rebound in 2020, but the uncertainty surrounding that is high with little sense currently that current trade and technology conflicts will be quickly resolved.
“The biggest risks to the forecast is an escalation of tensions on the trade front and on the technology front. That is already weighing on business sentiment and further escalation would dampen growth going forward.”
The IMF has consistently warned that there are no winners in a trade war, only losers and Gopinath echoed that sentiment.
“Well some of the slowing down and growth is self-inflicted. So I think it’s important for countries to work together to resolve tensions on the trade front and the technology front. Simultaneously monetary policy should remain accommodative given softening inflation trends in major economies.”