The International Monetary Fund (IMF) has downgraded global growth for 2019 to 3% as much of the world’s economy deals with a ‘synchronised slowdown’.
In a statement on Tuesday (15 October), the group said that growth continues to be weakened by rising trade barriers and increasing geopolitical tensions.
“We estimate that the US-China trade tensions will cumulatively reduce the level of global GDP by 0.8% by 2020,” it said.
“Growth is also being weighed down by country-specific factors in several emerging market economies, and by structural forces, such as low productivity growth and ageing demographics in advanced economies.”
The IMF added that the weakness in growth is driven by a sharp deterioration in manufacturing activity and global trade, with higher tariffs and prolonged trade policy uncertainty damaging investment and demand for capital goods.
In addition, the automobile industry is contracting owing also to a variety of factors, such as disruptions from new emission standards in the euro area and China that have had durable effects. Overall, trade volume growth in the first half of 2019 has fallen to 1%, the weakest level since 2012.
On a positive note, the IMF said that the uptick in global growth for 2020 has been driven by emerging market and developing economies that are projected to experience a growth rebound to 4.6%.
About half of this rebound is driven by recoveries or shallower recessions in stressed emerging markets, such as Argentina, Iran, and Turkey, and the rest by recoveries in countries where growth slowed significantly in 2019 relative to 2018, such as Brazil, India, Mexico, Russia, and Saudi Arabia, the IMF said.
However, the group noted that there is considerable uncertainty surrounding these recoveries, especially when major economies like the United States, Japan, and China are expected to slow further into 2020.
The IMF said that South Africa is projected to grow by 0.7% in 2019 – well below the 3.9% combined forecast for other emerging market and developing economies.
This is expected to increase to 1.1% in 2020. By comparison, China is expected to increase by 6.1%, Russia by 1.1% and Brazil by o.9%.