IMF and CEOs say the global economy is slowing faster than expected

Photo by Fabrici Coffrini/AFP/Getty: The IMF's chief Christine Legarde unviels the bad news

The following article published by Bloomberg (21 January 2019) outlines the serious concern of economists and international institutions have about the health of the global economy, being put under greater stress by rising political tensions, that among other things, is having an impact on China’s participation in international trade and finance. For some time now, China has been the engine pulling along a very sick global economy. Prospects for the future are becoming even more precarious.

The International Monetary Fund, led by Christine Lagarde, is predicting global growth of 3.5 percenmt this year — down from the 3.7 percent expected in October.

The International Monetary Fund and corporate executives warned Monday that the global economy was slowing faster than expected, establishing a downbeat tone for this week’s annual meeting of the World Economic Forum.

Hours after the IMF cut its forecasts for the world economy this year and next, PricewaterhouseCoopers released a survey showing 30 percent of business leaders expected the expansion to weaken, about six times as many as a year ago.

“The world economy is growing more slowly than expected, and risks are rising,” IMF Managing Director Christine Lagarde told reporters in Davos, Switzerland, the home of the forum of policymakers, investors and executives that begins Tuesday.

The outlooks were published the same day China revealed that last quarter it had its slowest expansion since 2009. They also come at a time when investors are questioning the sustainability of demand as it’s buffeted by the U.S.-China trade war and other political flash points such as Britain’s withdrawal from the European Union and the partial shutdown of the U.S. government.

In executing its second downgrade in three months, the IMF predicted global growth of 3.5percent this year, beneath the 3.7 percent expected in October and the rate in 2018. Among major economies, the deepest revision was for Germany, which the IMF now sees expanding 1.3 percent this year, down 0.6 of a percentage point from October.

The unease is spreading to the boardroom, with North American executives especially worried, according to PwC. The number of North American executives declaring themselves optimistic fell to 37 percent from 63 percent last year.

“There’s a significant increase in pessimism toward the economy, spread pretty much around the world,” said Bob Moritz, global chairman of PwC.

There is still some optimism. 42% of those surveyed by PwC still see an improved outlook, albeit down from 57% last year. The IMF also left its projections for the United States and China unchanged and even anticipated a pickup in worldwide expansion to 3.6% next year.

Still, the probability of more pain is rising, especially if the current trade truce between the United States and China proves short-lived.

“It is important to take stock of the many rising risks,” said Gita Gopinath, the IMF’s chief economist. “Given this backdrop, policymakers need to act now to reverse headwinds to growth and prepare for the next downturn.”

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