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IMF reduces its outlook for 2019 but remains positive for 2020

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  • 6 months ago
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The IMF has again reduced its global economic growth forecast for 2019, citing current issues such as trade tensions and the Fed’s current stance on interest rates.

It also expects the world economy to grow by 3.3% this year, which is slightly lower than its previously forecasted figure of 3.5%, however, it is upbeat about the coming year as it expects growth in 2020 to expand by 3.6%

The IMF’s report comes as the Congress struggles to pass the United States-Mexico-Canada Agreement (USMCA), a trade deal signed by President Donald Trump and his Mexican and Canadian counterparts at the time, which would replace the existing North Atlantic Free Trade Agreement (NAFTA).

“The balance of risks remains skewed to the downside,” the IMF said.

“Failure to resolve differences and a resulting increase in tariff barriers above and beyond what is incorporated into the forecast would lead to higher costs of imported intermediate and capital goods and higher final goods prices for consumers.”

The USMCA was signed on Nov. 30, but has not won over congress yet and getting it through the legislative body will be tough for Trump's administration as it faces the Democrat-controlled House and the same deal was criticized by Republican Sen. Chuck Grassley.

Should the deal between the three countries fall through, the ramifications for the U.S. economy would be massive as Canada and Mexico are two of the U.S.′ three largest trade partners and made up 30% of U.S. global trade in 2018.

“Higher trade policy uncertainty and concerns of escalation and retaliation would reduce business investment, disrupt supply chains, and slow productivity growth,” according to the IMF. “The resulting depressed outlook for corporate profitability could dent financial market sentiment and further dampen growth.”

 

 

Source: Smart Trend Team