**MNI POLICY: IMF WEO: 2019 World Growth Revised Down To +3.5%

--Things We Learned From The January WEO Update

By Kevin Kastner

     WASHINGTON (MNI) - The International Monetary Fund issued the January

update to their World Economic Outlook Monday. The update shows lowered global

growth expectations for 2019 and 2020, due in large part to a less favorable

outlook for the Euro area. 

     Here are the key points from January WEO update:

     -The IMF lowered the global growth pace to 3.5% for 2019 from the 3.7%

estimate in the October WEO, and cut the 2020 forecast to 3.6% from 3.7%. Most

of the lowered expectation was centered in a downward adjustment to Euro area

growth, as growth estimates for the US, UK, and Canada were left roughly

unchanged and growth for Japan was revised up.

     -The IMF noted that balance of risks to global growth have moved further to

the downside, led by trade concerns and tighter financial conditions. A slowdown

in growth at the end of 2018 could be continued in 2019 if trade tensions

continue, in addition to a disorganized Brexit withdrawal and a further slowdown

in China. 

     -The growth forecast for the Euro area was revised down by 0.3pp to 1.6%

for 2019, with the forecast for Germany revised down 0.6pp to 1.3% due to "soft

private consumption, weak industrial production following the introduction of

revised auto emission standards, and subdued foreign demand." The 2019 growth

estimate for Italy was revised down 0.4pp to +0.6% on "weak domestic demand and

higher borrowing costs as sovereign yields remain elevated." Additionally the

growth estimate for France as revised down 0.1pp to 1.5%.

     -The WEO update left their US growth pace forecast at 2.5% for 2019 and

1.8% for 2020. The IMF noted that this is a slowdown from the 2.9% estimate for

2018, on "the unwinding of fiscal stimulus and as the federal funds rate

temporarily overshoots the neutral rate of interest." The IMF noted that even

with the slowdown over the next two years, US growth remains above its potential

growth rate, with expectations of strong domestic demand growth expected to

boost imports and widen the current account deficit.

     -The growth forecast for the United Kingdom was unrevised at 1.5% for 2019

and revised up to 1.6% for 2020. The IMF noted offsetting factors for

2019--Brexit uncertainty on the negative side, but a positive impact from

announced fiscal stimulus. The upward adjustment to 2020's growth pace assumes

that a Brexit deal will be reached this year, but the IMF notes that as of

mid-January, that outcome remains uncertain.

     -Growth forecasts for Japan were revised up by 0.2pp for both 2019 and

2020, to +1.1% and +0.5%, respectively. This was due to fiscal support in 2019

to offset the impact of the planned consumption rate tax increase. At the same

time, the two large trading partners with the US--Canada and China--saw little

revisions to their growth forecasts for 2019 and 2020. Canada's growth is seen

at 1.9% for both 2019 and 2020, slower than previous in 2019 and stronger in

2020. China's growth was unrevised at 6.2% for both 2019 and 2020.

--MNI Washington Bureau; tel: +1 202-371-2121; email: kevin.kastner@marketnews.com

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