The International Monetary Fund (IMF) has cut its global economic growth forecasts for both 2018 and 2019, saying that ongoing trade wars among the world’s largest economies are beginning to have a negative impact.
The new forecasts, released Tuesday morning ahead of the IMF and World Bank annual meetings, show that a burst of strong growth, fueled partly by U.S. tax cuts and rising demand for imports, was starting to wane in the wake of trade wars – notably between the U.S. and China, the world’s two largest economies.
The IMF said in an update to its World Economic Outlook that it was now predicting 3.7% global growth in both 2018 and 2019, down from its July forecast of 3.9% growth for both years.
The downgrade reflects factors such as the introduction of import tariffs between the United States and China, weaker performances by euro-zone countries, and rising interest rates that are pressuring some emerging markets with capital outflows, notably Argentina, Brazil, Turkey and South Africa.
"Notwithstanding the present demand momentum, we have downgraded our 2019 U.S. growth forecast owing to the recently enacted tariffs on a wide range of imports from China and China's retaliation," reads the IMF economic outlook.
The IMF cut its 2019 U.S. growth forecast to 2.5% from 2.7% previously, while it cut China's 2019 growth forecast to 6.2% from 6.4%. It left 2018 growth forecasts for the two countries unchanged at 2.9% for the United States and 6.6% for China.
The euro-zone's 2018 growth forecast was cut to 2.0% from 2.2% previously, with Germany particularly hard hit by a drop in manufacturing orders and trade volumes.
