IMF: slowdown threatens 90% of the world

The economic slowdown threatens 90% of the world and Trump trade war costs $700bn.

The US President Donald Trump’s trade war will cost global growth of about $700bn by 2020, the size of the Swiss economy, the new managing director of the International Monetary Fund (IMF), Kristalina Georgieva said on Tuesday.

Georgieva expressed regret over the “simultaneous slowdown” in the rate of economic growth in the world, pointing out that the IMF will issue, on October 15, the current revised projections for growth for both 2019 and 2020. “We expect 2019 growth to slow in about 90% of the world,” Georgieva said in a speech ahead of the fall meetings of the IMF and World Bank in Washington.

“Growth will fall this year to the lowest level since the beginning of this decade,” said Georgieva, who took office a week ago.

For more than a year and a half, the US president has been waging a trade war against China to put an end to trade practices he considers “unfair”. “Global trade growth is almost at a standstill,” said Georgieva, the IMF’s managing director, arguing that multiple trade tensions are no longer a risk but are “having an impact,” noting that global GDP could fall by about 0.8% by 2020, from 0.5% in July, which is the size of Switzerland’s economy”.

Besides trade, Britain’s exit from the EU without agreement and corporate debt pose other serious threats to the global economy. In some countries, companies have benefited from lower interest rates to borrow to finance mergers and acquisitions rather than investment, according to the IMF.

Georgieva said that in the event of a significant slowdown, the debt of companies at risk of default will rise to $19tn, or about 40% of the total debt in eight major economies; Germany, China, Spain, the United States, France, Italy, Japan and the United Kingdom, noting that this figure is higher than the levels recorded during the 2008 financial crisis.

Georgieva also called on Germany to increase its spending to revive its economy, saying that Germany should allocate additional expenditures in particular for infrastructure and research. Given the signs of a slowing global economy, it was time for countries with fiscal capacity, such as Germany, the Netherlands, and South Korea, to pave the way, noting that low interest rates still allowed some governments more room to act.

It is noteworthy that the Bulgarian, Georgieva headed the fund since October 1, succeeding French Christine Lagarde. Prior to the IMF, Georgieva held several key positions, most notably as CEO of the World Bank. She was also the EU Commissioner for Budget.

The World Bank President, David Malpas said on Monday that the outlook for global economic growth was deteriorating amid uncertainty over Britain’s exit from the European Union, trade tensions and economic downturn in Europe.

“Global economic growth is slowing,” Malpas said in a speech in Montreal ahead of the annual meetings of the IMF and the World Bank, adding that the global economy now appears weaker than the bank’s forecast in June of 2.6% in 2019.

Malpas said the global economy has been hit by “Brexit, Europe’s economic downturn and trade uncertainty”.

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