Effect of global 'slowdown' is 'more pronounced' in India

Marco Green
October 9, 2019

The IMF managing director said that global trade growth has come to a "near standstill".

President Donald Trump has insisted that the US economy has not been affected by the higher tariffs he has imposed on China and other nations, which have triggered retaliatory tariffs on USA goods.

"The key is to improve the system, not abandon it", she said.

Georgieva gave her inaugural speech on Tuesday after assuming the role of managing director on October 1 following Christine Lagarde's departure early this year to run the European Central Bank.

The IMF was set to raise funding quotas in a way that would more accurately reflect China's position in the global economy and therefore have it replace Japan as the second most influential voice in the body. Much of the GDP losses will come from a decline of business confidence, productivity losses from broken supply chains and negative market reactions, she said.

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

Georgieva compared the present scenario to that of two years ago, before the US-China trade war, when countries representing almost 75 per cent of the world's output were seeing accelerating growth.

The Organisation for Economic Cooperation and Development trimmed its forecast last month, while World Bank President David Malpass said Monday that the lender is preparing to downgrade its assessment from a projection of 2.6 per cent it made in June.

"The precarious outlook presents challenges for countries already facing difficulties - including some of the Fund's program countries".

"Even if growth picks-up in 2020, the current rifts could lead to changes that last a generation - broken supply chains, siloed trade sectors, a "digital Berlin Wall" that forces countries to choose between technology systems", the International Monetary Fund head added.

"We need to work together, now, and find a lasting solution on trade", Georgieva added.

In what could be seen as a jab at China and other protectionist states, she warned against subsidies, lax enforcement of intellectual property rights and technology transfers.

"We are decelerating, we are not stopping, and it's not that bad". By contrast, two years ago, growth was accelerating across three-quarters of the globe in a synchronized upswing, she added. "And yet, unless we act now, we are risking a potential more massive slowdown", Georgieva said.

Georgieva called for central banks around the world to maintain low rates where appropriate, but warned that this could prompt excessive credit growth and risky investments in the search for better yields, leading to increased financial vulnerabilities. "As a reference, this is approximately the size of Switzerland's entire economy", she said.

The economist said the main goal should now be to fix the fractures that have emerged and called for a coordinated global response.

Other reports by Click Lancashire

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