US –China trade war to drag down global growth: IMF

The trade war between the United States and china will drag the global economy down with the gloomiest growth forecast for 2019 and 2020 since the financial crisis, warned the International Monetary Fund.

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Prediction estimated the world economy will grow by only 3 percent in 2019 picking up to 3.4%  by 2020, a considerable from 2017’s 3.8% growth.

“The subdued growth is a consequence of rising trade barriers, elevated uncertainty surrounding trade and geopolitics, idiosyncratic factors causing macroeconomics starin in several emerging market economies, and structural factors, such as low productivity growth Gita Gopinath, said while presenting the Global Economic Outlook report on Tuesday, Efe news reported.

The report added that the slowdown in global growth is partly linked to and easing of monetary policy in advanced and emerging economies.

“A notable feature of the sluggish growth in 2019 is the sharp and geographically board-based slow down in manufacturing and global trade,” the economist added.

According to IMF projection, China will grow 6.1% this year and 5.8% in 2020, will below 6.6% growth in 2018

The US will grow by 2.4% in 2019 and 2.1% in 2020.

The detrimental effects of trade uncertainty have affected investment although employment and consumption are stable thanks to policy stimulus, the reported added.

The struggle between Washington and Beijing, which has been going on for more than a year, is having an increasingly international impact.

By 2020 the commercial war between the two will reduce global GDP by 0.8%, according to the agency’s calculations.

“In the euro area, growth has been downgraded due to weak exports, while Brexit-related uncertainty continues to weaken growth in the United Kingdom,” the report added.

Japan will continue to expertise very low growth rates, with a forecast of 0.9%  in 2019 and 0.5% in 2020, while Latin America’s economy is expected to stagnate this year with a GDP for the entire region of 0.2%

Two of the continent’s major economies, Brazil and Maxico, are expected to grow less than on 2018 which paired with the crisis in Argentina and Venezuela explain the low GDP growth forecast for Latin America.

Other countries that will have weaker economies are Russia, with an estimated growth of 1.1% this year and 1.9% next year, and Saudi Arabia with just 0.2% projected growth this year due to low oil prices.

“With a synchronized slowdown and uncertain recovery, the global outlook remains precarious,” Gopinath said.

“At 3% growth, there Is no room for policy mistakes and an urgent need for policymakers to cooperatively deescalate trade and geopolitical tensions.”  Read more.. 

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