The world economy absorbed more bad news Monday
The International Monetary Fund (IMF) cut its growth forecast for 2019. And China, the world’s second-biggest economy, said it had slowed to its weakest pace since 1990.
The IMF cut its estimate for global growth this year to 3.5 per cent, from the 3.7 per cent it had predicted in October and down from 2018’s 3.7 per cent. The fund cited heightened trade tensions and rising interest rates.
“After two years of solid expansion, the world economy is growing more slowly than expected, and risks are rising,” said IMF Managing Director Christine Lagarde as she presented the forecasts at the World Economic Forum in Davos, Switzerland.
The IMF is not alone in its pessimism. The World Bank, the Organization for Economic Cooperation and Development, and other forecasters have also downgraded their world growth estimates.
Among the key concerns is the Chinese economy. The country is slowing just as its leadership tries to turn it into a more modern economy by reducing its reliance on manufacturing and exports and increasing consumer spending.
The country reported Monday growth of 6.6 per cent in 2018, the weakest since 1990. Demand for Chinese exports weakened last year, and the IMF expects China’s growth to decelerate again this year – to 6.2 per cent.
The IMF left its prediction for US growth this year unchanged at 2.5 per cent – though a continuation of the partial 31-day shutdown of the federal government poses a risk.
The IMF trimmed the outlook for the 19 countries that use the euro as their currency to 1.6 per cent from 1.8 per cent. Germany got a big downgrade from the IMF, the result of weaker demand for German exports and problems in the country’s auto industry.
Britain’s messy divorce from the European Union and Italy’s ongoing financial struggles also pose threats to growth in Europe.
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