The International Monetary Fund (IMF) expects that global growth will increase modestly from 2.9 percent in 2019 to 3.3 percent in 2020 and 3.4 percent in 2021, which represents a slight downward revision of 0.1 percent for 2019 and 2020, and 0.2 percent for 2021 according to the World Economic Outlook report update on Tuesday.
The report said that this expectation stems from the downward revisions for India, but the projected recovery for global growth remains uncertain, as it “continues to rely on recoveries in stressed and under-performing emerging market economies, as growth in advanced economies stabilises at close to current levels.”
According the report, the US-China Phase I deal, if durable, is expected to reduce the cumulative negative impact of trade tensions on global GDP by the end of 2020 from 0.8 percent to 0.5 percent.
For emerging markets and developing economies, the report forecasted a pickup in growth from 3.7 percent in 2019 to 4.4 percent in 2020 and 4.6 percent in 2021, a downward revision of 0.2 percent for all years. The biggest contributor to the revision is India, where growth slowed sharply due to stress in the non-bank financial sector and weak rural income growth.
China’s growth has been revised upward by 0.2 percent to 6 percent for 2020, reflecting the trade deal with the United States.
Nonetheless, pickup in global growth for 2020 remains highly uncertain based on improved growth outcomes for stressed economies like Argentina, Iran, and Turkey and for underperforming emerging and developing economies such as Brazil, India, and Mexico.
It is also expected that interest rates will stay low for a long while, so macro prudential tools should be proactively used to prevent the build-up of financial risks.