The fallout of the ongoing US-China trade war will hit economies in 2019, with the International Monetary Fund cutting its global growth forecast owing to the tarffs imposed by the US on Chinese imports and China’s retaliation.
The global body now forecasts 3.7% global growth for 2018 and 2019, down from 3.9% forecast in July – and warns the clash between the US and China will impact other countries.
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Addressing a press conference in Indonesia on Tuesday (9 October), Maurice Obstfeld, economic counsellor and director of research at the IMF, said: “The possibility that China and the US resolve their disagreements would be a significant upside to the forecast. You know, at some level, I think it is not surprising that we are more tentative in our optimism than we were six months ago because, if you have the world’s two largest economies at odds, that is a situation in which everyone is going to suffer. So it would be great if the talks could lead to an accommodation in which disruptions to trade were put aside.”
Additional contributors to the downgrade include weaker performances from eurozone countries, Brexit, and rising interest rates in some emerging markets. The eurozone’s 2018 growth forecast was dropped to 2% from 2.2% due to Germany, in particular, having been hit by a significant drop in manufacturing orders and trade volumes.
Emerging markets will be impacted by global tightening of financial conditions as interest rates begin to normalise, added Obstfeld.
“Back six months ago, we saw a very balanced expansion. We saw a lot of upgrades in a lot of countries, a lot of momentum, with risks evenly balanced upside and downside. And now growth is much more uneven.
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By GlobalData“When you do have this sort of uneven growth and countries are not all pulling in the same direction, you do see less momentum than we were so excited about six months ago. Where things will go from here on in, we do not know.”
See also: Trade policies risk damaging US economic growth
