IMF's new chief Georgieva warns of 'synchronized slowdown' in global growth

Cheryl Sanders
October 9, 2019

For the global economy, the cumulative effect of trade conflicts could mean a loss of around United States dollars 700 billion by 2020, or about 0.8 per cent of GDP, she said, which is far higher than the fund previously forecast as its worst case scenario.

The executive director gave a message about the global economic outlook, but in a later talk with Bloomberg editor Tom Keene, she referred to countries that have International Monetary Fund programs, including Argentina.

"In 2019, we expect slower growth in almost 90 percent of the world", she said. "The global economy is now in a synchronised slowdown". She pointed out that widespread deceleration meant growth in 2019-'20 would fall to its "lowest rate" since the beginning of the decade, ANI reported.

"Even if growth picks-up in 2020, the current rifts could lead to changes that last a generation - broken supply chains, siloed trade sectors, a "digital Berlin Wall" that forces countries to choose between technology systems", the Bulgarian economist added who held the No.2 job at the World Bank.

U.S. President Donald Trump has taken a hard line on trade issues and has become involved in several tit-for-tat tariff moves - the most substantial of which is with China.

"In part because of the trade tensions, worldwide manufacturing activity and investment have weakened substantially", she said, noting that services and consumption could soon be at risk because "the fractures are spreading".

"Our research shows that changes in spending are more effective and have a multiplier effect when countries act together", she said. "Everyone loses in a trade war", Georgieva said.

The Reserve Bank of India on Friday lowered India's GDP growth estimate for the year to 6.1 per cent from the earlier figure of 6.9 per cent due to the on-going period of economic slowdown.

Per the October 2019 Monetary Policy File of the RBI, the advance-term arrive of the Indian economic system has fraught risks and the aggregate of home and world headwinds has sorrowful economic activities in the nation, acknowledged the reports. "The world economy is still growing, it is just growing too slowly".

Ms. Georgieva's first speech as head of the International Monetary Fund was billed as a preview for next week's annual meetings in Washington of the International Monetary Fund and its sister lending organization, the World Bank.

The lasting solution to the trade conflicts will require co-operation from all countries, Ms. Georgieva said. "Fiscal policy must play a central role", she said.

"Our new analysis shows that if a major downturn occurs, corporate debt at risk of default would rise to US$19 trillion, or almost 40% of the total debt in eight major economies", she said.

In her first speech after taking charge, Georgieva said the global economy is in the midst of a "synchronized slowdown", effects of which have particularly been felt in countries such as India.

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