Marking its third downgrade since October, the global lender is forecasting the global economy to grow 3.3 percent this year, its slowest expansion since 2016. The latest reading is down by 0.2 percent from a January outlook. Using its World Economic Outlook report to detail its predictions for the economy over the next two years, the IMF warned how global trade tensions, weakness across the eurozone and uncertainty from Brexit were to blame for the lower growth forecast. The projected growth rate for 2020 was unchanged at 3.6 percent.
The United States and China have been under the IMF’s radar for several months now as the nations continue to remain locked in a bitter tit-for-tat trade war on hundreds of billions of dollars of goods.
In the space of eight months, the US has imposed punitive tariffs on $250 billion worth of imports from China.
Beijing has retaliated with tariffs of their own on $110 billion worth of American goods, including soybeans and other commodities.
The US economy was downgraded from 2.9 percent in 2018 to 2.3 percent for this year on signs that a fiscal stimulus fueled by tax cuts was producing less activity than previously expected.
The outlook for Chinese growth was raised slightly for this year, to 6.3 percent, in part because the US trade war did not escalate as much as anticipated.
The IMF said Beijing might need to unleash fiscal stimulus “to avoid a sharp near-term growth slowdown that could derail the overarching reform agenda”.
In terms of Europe, the IMF suggested nations such as Germany, which has suffered from weaker manufacturing, might need to take short-term actions to prop up growth.
Germany has been dented in recent months by weaker demand for its exports, softer consumer spending and car sales being hit by new emissions standards.
The international organisation said it still expects that a sharp slowdown in Europe, and said this weakness accounted for much of the reduction in the global growth forecast.
Brexit was highlighted as a potential mishap by the IMF, should the UK leave the European Union without a deal in place.
The new forecast is on the condition of Britain leaving with a deal, but Fund warned how exiting without measures in place could cut more than 0.2 percent points from global growth this year.
Some emerging market economies will give way to a general re-acceleration in the second half of 2019, the IMF
The report added: “However, the possibility of further downward revisions is high, and the balance of risks remains skewed to the downside.”