• According to the IMF’s chief economist, the growth outlook is precarious
  • Although the Fund expects somewhat of a pick-up of growth next year, this is driven by a small group of emerging and developing economies which are currently under stress or underperforming
  • The modest growth acceleration reflects country-specific factors, rather than the expectation of a broad-based improvement
  • In the US, the growth slowdown is expected to continue well beyond 2020 and Chinese growth is projected to decline to 5.8% next year. Against this background, the projected slight pick-up in the eurozone, driven by Germany and Italy, and which supposes that external demand regains some momentum, looks challenging.

The title of the IMF’s new World Economic Outlook (WEO) sounds more like an observation than an assessment, let alone a forecast: “Global manufacturing downturn, rising trade barriers”. For a clearer and punchier message, the reader should check the blogpost of the Fund’s chief economist Gita Gopinath: “Synchronized slowdown, precarious outlook”. The IMF now expects the world economy to grow 3.0% this year (versus 3.3% in the April WEO) and 3.4% next year (3.6% in April). This would still leave growth below the 3.6% of 2018. The forecast for 2020 warrants little excitement, even less so when considering that “about 70 percent of the projected 2020 pickup in global growth is accounted for by a small group of emerging market and developing economies in severe distress or currently underperforming relative to past averages.” It concerns Argentina, Iran, Turkey, Venezuela, Brazil, Mexico and Russia. With such a diverse group of countries and, given their limited weight in the world economy, we should not count on significant spillover effects, at least not in the advanced economies1 In addition, if distress were to last longer, this would obviously jeopardise the projected pick-up of global growth.

Although the IMF expects the US to slow down, from 2.4% this year to 2.1% next, both numbers are slightly higher than in April (respectively 0.1 and 0.2 percentage points). In China, the slowdown is expected to continue and growth is projected to drop below 6.0% next year to 5.8%. The developments in the US and China create a challenge for the eurozone. Nevertheless, the Fund expects somewhat of an acceleration next year (from 1.2% in 2019 to 1.4%), on the back of a rebound in Italy (from 0.0% to 0.5%) and, particularly, Germany (from 0.5% to 1.2%)

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