IMF Managing Director Christine Lagarde said on Monday that the risk of a sharper slowdown in global growth had increased, even if recession was not yet around the corner.
Lagarde was speaking at the World Economic Forum in Davos, Switzerland after the IMF cut down its 2019 and 2020 global growth forecasts due to weakness in Europe and some emerging markets. Lagarde urged policymakers to address economic vulnerabilities, especially by reducing high government debt. She said failure to resolve trade tensions could further destabilize a slowing global economy.
In its second downgrade in three months, the global lender also cited a bigger-than-expected slowdown in China’s economy and a possible “No Deal” Brexit as risks to its outlook, saying these could worsen market turbulence in financial markets.
The IMF predicted the global economy to grow at 3.5 percent in 2019 and 3.6 percent in 2020, down 0.2 and 0.1 percentage point respectively from last October’s forecasts.
The new forecasts, released on the eve of this week’s gathering of world leaders and business executives in the Swiss ski resort of Davos, show that policymakers may need to come up with plans to deal with an end to years of solid global growth.
“After two years of solid expansion, the world economy is growing more slowly than expected and risks are rising,” IMF Managing Director Christine Lagarde told a briefing.
“Does that mean a global recession is around the corner? No. But the risk of a sharper decline in global growth has certainly increased,” she said, urging policymakers to be ready for a “serious slowdown” by boosting their economies’ resilience to risks.
The downgrades reflected signs of weakness in Europe, with its export powerhouse Germany hurt by new fuel emission standards for cars and with Italy under market pressure due to Rome’s recent budget standoff with the European Union.
Growth in the euro zone is set to moderate from 1.8 percent in 2018 to 1.6 percent in 2019, 0.3 percentage point lower than projected three months ago, the IMF said.
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