Business

IMF cuts forecast for global growth

It points to US-China trade war, Brexit as key risks

WASHINGTON The global economy is slowing more than expected.

A sharp downturn could require world leaders to coordinate stimulus measures, the International Monetary Fund (IMF) said as it cut its forecast for world economic growth this year.

The global lender's World Economic Report pointed to the US-China trade war and a potentially disorderly Brexit from the European Union as key risks and warned that chances of further cuts to the outlook were high.

Some major economies, including China and Germany, might need to take short-term actions, the IMF said.

"This is a delicate moment for the global economy," IMF chief economist Gita Gopinath said in a news conference to discuss the report.

Governments may need to open their pocketbooks at the same time "across economies" if the slowdown becomes more serious, Ms Gopinath said, adding that loose monetary policy might also be needed.

The comments provided an eerie warning to those gathering in Washington this week for the spring meetings of the IMF and World Bank.

In its third downgrade since October, the IMF said the global economy will likely grow 3.3 per cent this year, the slowest expansion since 2016.

The forecast cut 0.2 percentage point from the IMF's outlook in January.

The projected growth rate for next year was unchanged at 3.6 per cent.

More than two-thirds of the expected slowdown this year stems from troubles in rich nations, including members of the EU.

"In this context, avoiding policy missteps that could harm economic activity should be the main priority," the IMF said in its report.

One potential misstep lies in Britain's indecision over how to leave the EU. Despite looming deadlines, London has not decided how it will try to shield its economy during the exit process.

The IMF's new forecast assumes an orderly Brexit, but the IMF said a chaotic process could shave more than 0.2 percentage point from global growth this year.

The US economy, while seen outperforming other rich nations' economies, also got a downgrade on signs that a fiscal stimulus fuelled by tax cuts was producing less activity than previously expected.

US Treasury Secretary Steven Mnuchin disputed the IMF's assessment that US growth was slowing and told lawmakers he was not concerned about a recent inversion of the Treasury yield curve - often a harbinger of recession.

The global lender said it was slightly boosting its outlook for Chinese growth this year - to 6.3 per cent - in part because an expected escalation in the US-China trade war had not materialised.

Ms Gopinath said the Chinese economy was showing tentative signs of recovered growth, which she described as "green shoots". - REUTERS

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