IMF Forecasts "Synchronized Global Slowdown" – Weakest Growth ‘Since Lehman’

Following up on its ‘expectations management’ exercise last week, The IMF just issued its latest Global Economic Outlook, and just as we warned it’s the next in a new series of “worst since Lehman” reports.

“The world economy faces difficult headwinds,” the outlook said.

“Despite the recent decline in long-term interest rates creating more fiscal room, the global environment is expected to be characterized by relatively limited macroeconomic policy space to combat downturns and weaker trade flows, in part reflecting the increase in trade barriers and anticipated protracted trade policy uncertainty.”

The global growth estimate for 2019 was as high as 3.9% in mid-2018, but the latest report suggests the world economy will grow 3% this year, down from 3.2% seen in July, with the 2020 estimate lowered to 3.4% from 3.5% – the weakest since 2009, when the world economy shrank, as the fund chopped projections from the U.S. and Europe to China and India.

The International Monetary Fund made a fifth-straight cut to its 2019 global growth forecast, citing a broad deceleration across the world’s largest economies as trade tensions undermine the expansion.

“With a synchronized slowdown and uncertain recovery, the global outlook remains precarious,” IMF Chief Economist Gita Gopinath wrote in the report.

“There is no room for policy mistakes and an urgent need for policy makers to cooperatively de-escalate trade and geopolitical tensions.”

The fund estimates that 90% of of the world is seeing slower growth. This is a huge change to the global economy from two years ago, when growth was accelerating across three-quarters of the globe in a synchronized upswing.

The IMF report said “risks seem to dominate the outlook,” but offers some hope that recent monetary easing in many countries “could lift demand more than projected, especially if trade tensions between the U.S. and China ease and a no-deal Brexit is averted.”

The slowdown in global growth since 2017 and the projected pick up in 2020 reflects a major downturn and projected recovery in a group of emerging market economies under severe distress.

Perhaps most notably, China projections were reduced for both years, to 6.1% and 5.8% respectively – blamed conveniently on Trump and his trade wars, and, again, conveniently forgetting to mention that

the real reason for the economic slowdown has nothing to do with Trump however, and everything to do with China’s untenable debt load and Beijing’s resulting inability to boost the credit impulse which on every prior occasions succeeded in pushing the world away from the verge of recession. Well, not this time.

We will spare readers the obvious commentary of what would happen to the world’s ability to generate another credit impulse if the developed economies actually followed the IMF’s advice, and issue even more debt.

 

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