World Economy likely to grow by 3.9% this year. The International Monetary Fund (IMF) is not deviating from the global economic growth forecast that it drew in the month of April in 2018. With trade tensions and oil prices rising, it was expected that they would push growth forecasts to a negative territory. But IMF seems to be sticking to its guns though it warns that trade wars could end up having a major “negative effect” on the global economy. It is actually the European Brexit and migrant crisis that seems to be weighing heavy on the EU’s growth prospects.
About the growth rate
The growth rate is calculated only after including the account tariffs that are in force currently and does not consider larger actions like the expected automobile tariffs, etc. The economists from IMF highlight that the pace of growth has been declining despite the steady growth rate. The 3.9% growth in 2018 and 2019 will be the highest growth for two consecutive years since 2010 and 2011.
Country-wise growth change
The growth percentage of the two main countries that have a lot of trade tensions between them i.e. the US and China remains unchanged. While the US is expected to grow at a rate of 2.9% in 2018 and 2.7% in 2017, China is expected to grow by 6.6% in 2018 and 6.4% in 2019. Two major regions that are expected to see a downgrade in their growth rate are Europe and Japan. The growth rate of Japan is expected to fall by 0.2% as it had initially estimated a growth of 1.2% and now it shall expand by 1%.
Eurozone saw a fall in growth estimates from 2.4 to 2.2%. The IMF has also brought down India’s growth percentage for 2018 to 7.3% reducing it by 10 basis points and to 7.6% reducing it by 30 basis points for the year 2019. Brazil is also one of the exporters for which the growth rate forecast has been cut-down by 0.5%. The UK’s growth rate has been reduced by 0.2% to 1.4% in 2018.
The Threat
The world economy faces two major threats.
The first is the threat from President Trump’s policy on tariffs on the Chinese imports apart from automobile imports from EU. So far, the Trump government has imposed tariffs on over $34 billion value of Chinese goods, solar panels imports of steel and aluminum and washing machines.
The second is the retaliation from the trading partners. This could push the global trade into a crisis as governments look at protectionism for securing the interests of their vote banks.
The IMF Forecast
The IMF forecasts also emphasized that over the years, growth has been unevenly spread among different countries. Also, IMF has warned that if the current scenario along with the stress of President Trump’s tariff policies and the retaliation from the trading partners continues, the projected global annual economic output is expected to reduce by 0.5% by 2020 which signifies the loss of an amount as big as the economy of Thailand.
A Ray of hope for the future
Despite the shaky trade scenario and the other tensions enveloping the world, the IMF’s hope for maintaining the growth rate of the economy reinstates hope for a better, more peaceful tomorrow.
