MNI POLICY: IMF Cuts Growth Forecast, Trade Risks Linger

By Greg Quinn

     WASHINGTON (MNI) - The IMF cut its world growth forecast for the next two

years and said downside risks are still prominent even after a U.S.-China trade

deal and some clarity on Brexit.

     Global GDP growth will be 0.1 percentage point less this year at 3.3% than

forecast in the last World Economic Outlook from October, the Washington-based

fund reported Monday. Next year's expansion will be 0.2 percentage points lower

at 3.4%. 

     "The balance of risks to the global outlook remains on the downside, but

less skewed toward adverse outcomes than in the October WEO," the IMF reported. 

     China's growth will get a boost from the Phase One trade deal with the

U.S., while tensions with Iran could disrupt already tentative business

investment, the IMF said. Even with easing dangers from a tariff war or a sudden

Brexit, "few signs of turning points are yet visible in global macroeconomic

data."

     Greater cooperation such as restoring a trade dispute panel at the WTO and

addressing climate change are key to keeping the global economy on track,

especially with policymaking threatened by an era of greater social protests.

The IMF released the report as the Davos summit gathered global business and

government leaders including President Donald Trump.

     --INDIA, CENTRAL BANKS

     U.S. growth will slow from 2.3% in 2019 to 2% this year and 1.7% in 2021 as

a boost from past fiscal stimulus and looser financial conditions wear off.

Eurozone growth will be 1.3% this year and 1.4% next year on improving external

demand, the IMF said. Growth in China is projected to inch down from 6.1% in

2019 to 6% in 2020 and 5.8% in 2021.

     Emerging markets slowed late last year and India is a major source of

weakness in 2020. The Asian nation's growth forecast was slashed to 5.8% from an

October reading of 7% amid stress in the nonbank financial sector and lower

credit growth.

     The IMF also trimmed its 2019 global growth estimate a notch to 2.9%, and

it would have been another half point lower without a wave of central bank

stimulus. Advanced nations have "limited" room for more monetary help and "can

rely more on fiscal stimulus to support demand if the need arises," the report

said.

--MNI Ottawa Bureau; +1 613-314-9647; email: greg.quinn@marketnews.com

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