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IMF slashes forecast for global growth to lowest since 2008

By Lawrence Gash

Trade tensions take blame as predicted expansion is put at just 3 per cent

The International Monetary Fund (IMF) has downgraded its forecast for global economic growth this year to only 3 per cent, the lowest level since 2008.

The lender of last resort’s economic outlook report blamed trade tensions as the key cause of a worldwide slowdown, with Chinese debt reforms and Brexit uncertainty additional factors.

IMF chief economist Gita Gopinath said that “higher tariffs and prolonged uncertainty surrounding trade policy have dented investment and demand for capital goods”.

The China US trade war, which has rumbled on through 2019 as President Trump seeks to redress his country’s deficit with China, is not the only dispute to flare up this year. Trade relations between South Korea and Japan have deteriorated after a dispute over Japan’s imperial past.

As for Brexit, at a dinner last night with President Emmanuel Macron of France, the German Chancellor Angela Merkel said: “A potential competitor will of course emerge for us [the EU]. That is to say, in addition to China and the United States of America, there will be Great Britain as well."

The IMF predicted that global growth in 2020 will increase to 3.4 per cent, a moderate improvement but a downgrade of 0.2 from its April forecast. It praised the effect of ultra-low interest rates, arguing that “global growth would be lower by 0.5 percentage points in both 2019 and 2020” without the record levels of monetary stimulus that organisations such as itself provide.

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