World News

Trade conflicts fuel synchronised global slowdown

Trade conflicts fuel synchronised global slowdown

The new head of the International Monetary Fund (IMF) said Tuesday that the global economy was experiencing a "synchronised slowdown" with almost 90 per cent of the world witnessing slower growth in 2019. For the global economy, the cumulative effect of trade conflicts could mean a loss of about US$ 700 billion by 2020, about 0.8% of GDP", he said, urging world leaders: "We must work together now and find a lasting solution to trade.

Referring to a new International Monetary Fund research, which shows how structural reforms can raise productivity and generate enormous economic gains, she said these changes are the key to achieving higher growth over the medium and long-term.

"In 2019, we expect slower growth in almost 90 per cent of the world".

The fresh head of the 189-nation International Monetary Fund in her blunt speech explained, "This in vogue deceleration capacity that voice this year will fall to its lowest rate since the starting of the final decade".

And even if growth resurges next year, some of the "rifts" already caused by the trade conflicts could cause "changes that last a generation", such as shifting supply chains, she said.

US President Donald Trump is trying to reduce the trade deficit, while China disagrees with Washington's policies and responds with similar measures.

The trade tensions have contributed to slowing manufacturing and weakened investment, creating a "serious risk" of spillover to other areas of the economy like services and consumption, Georgieva continued in prepared remarks.

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She said the World Economic Outlook to be released next week will show downward revisions for 2019 and 2020. "Everyone loses in a trade war", Georgieva said. By contrast, two years ago, growth was accelerating across three-quarters of the globe in a synchronized upswing, she added.

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.

She warned that due to the world's interconnected economies, many countries will soon feel the impact.

The IMF chief's statement came even as the Reserve Bank of India (RBI) said that the Indian economy which has largely been subdued in the past few quarters and signs of a slowdown have cropped up, is likely to face several more risks in the near term. "The world economy is still growing, it is just growing too slowly".

The headline numbers reflect a complex situation, she said.

Georgieva said countries need to discuss legitimate trade issues such as subsidies, intellectual property rights, and technology transfer. While some governments are burdened by high debt levels, "in places such as Germany, the Netherlands, and South Korea, an increase in spending - especially in infrastructure and R&D - will help boost demand and growth potential", Georgieva said.