MNI POLICY: IMF WEO: Global Growth Slowing, Downside Risks

By Kevin Kastner

     WASHINGTON (MNI) - The International Monetary Fund issued the July update

to their World Economic Outlook Tuesday. The update shows a continued concern

about trade issues, disinflationary pressures, and a global slowdown. However,

some advanced economies saw upward revisions to their growth forecasts for the

next two years, particularly the US.

     Here are the key points from July WEO update:

     - The IMF's noted that additional trade escalation was averted by the June

G20 meetings, but said that already-enacted tariffs and Brexit-related concerns

are still issues. It said it is important to reduce trade tensions and resolve

uncertainty around trade issues. They said that "countries should not use

tariffs to target bilateral trade balances or as a substitute for dialogue to

pressure others for reforms."

     - The IMF cited weaker-than-expected global activity, as evidenced by

recent GDP surveys and generally softening inflation. It said that accommodative

monetary policy remains appropriate and that "investors now anticipate more

significant policy easing from central banks, including in the United States"

due to the dovish shifts seen from a number of central banks since mid-June.

     - For the U.S., the IMF now sees 2.6% growth for 2019, up from 2.3% in the

April WEO. The key reason a stronger-than-expected first quarter reading, but

noted a slowdown in domestic demand and imports earlier in the year. The IMF

still sees a slowdown to a 1.9% rate in 2020 on the continued unwinding of the

stimulus.

     - For the Euro area, the IMF still sees a 1.3% pace for a 2019 and slightly

faster 1.6% pace for 2020. The IMF revised down its forecast for Germany to 0.7%

for 2019, but revised up its 2020 forecasts solidly to 1.7% for 2020. The

forecast for Spain was revised up for 2019 to a 2.3% rate from the 2.1% gain

forecast in the April WEO.

     - For the UK, the forecast is for 2019 was revised up slightly to 1.3% and

unrevised at 1.4% in 2020. The upward revision to 2019 growth was due to

stronger first quarter data that was fueled by pre-Brexit stockpiling, which is

likely to be offset later in the year. The IMF said their forecasts assumed "an

orderly Brexit followed by a gradual transition to the new regime," which the

IMF noted currently remains uncertain.

     - For Japan, the IMF sees a 0.9% rate of growth for 2019, a downward

revision from the 1.0% pace seen in the April WEO. Likewise, the pace of growth

was revised down to 0.4% for 2020 from the 0.5% estimate in the April WEO, with

some fiscal measures assumed to offset the October consumption tax increase.

     - For Canada, there were no revisions to the 1.5% growth pace expected for

2019 or the 1.9% pace expected for 2020, but Canada is mentioned in relation to

the trade agreements yet to be settled, so some downside risk is likely assumed

if those agreements are not resolved.  

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

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