October 22, 2020

World Economy To Slow Down To 3.2% In 2019: IMF

The IMF has predicted that the global economic growth rate is going to slow down further. The growth predictions have declined by 0.1% for the years 2019 and 2020 to 3.2% and 3.5% respectively.

The decline is mainly due to the US-China trade war and although the US has eased some of the tensions and the two economic giants have started to look for other ways to settle their differences, the risk of no-deal Brexit and heightened tensions in the Strait of Hormuz are now contributing to the slow-down of the global economy.

IMF chief economist Gita Gopinath has said that “Global growth is sluggish and precarious, but it does not have to be this way, because some of this is self-inflicted.”

IMF has said that governments should focus on resolving their disputes by negotiations instead of indulging themselves in trade wars, which in turn has a global effect.

Other than that, the tensions in the Strait of Hormuz between Iran and the US have further increased the burden on economic growth. The narrow strait is a choking point for more than a third of the world’s natural gas supply and 20% of the world’s oil supply. Iran has recently seized two British oil tankers and this move has increased tensions in the region even further.

Moreover, investors worldwide are restraining from investing in businesses due to increased uncertainty and confusion in the markets and have chosen to invest in safer options, such as gold. Investment in gold has raised the gold rates by more than $155/ounce since January 1, 2019.

The US tariffs on China have slowed down the Chinese economy and this has effected almost all the markets worldwide and the emerging markets in particular. The growth in emerging markets has slowed down due to the trade war and the increase in the prices of oil have made the situation even worse.

IMF estimates that the tariffs imposed by the USA if continued at this level can reduce the total world economic output by 0.5% in 2020.

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