WASHINGTON – Lower interest rates and reduced trade tensions are likely to boost the global economy over the next two years and help keep growth modest.
This is the view of the International Monetary Fund, which predicts that global economic growth will accelerate to 3.3 percent in 2020 and 3.4 percent in 2021 from 2.9 percent last year. The international economy is getting a significant boost – up 0.5 percentage points from last year’s growth and this year – from the central bank’s low-rate policy, the lending agency said in a global outlook report on Monday. The US Federal Reserve, for example, cut rates three times last year and expects to keep rates low for the foreseeable future.
And an interim trade agreement signed last week by the United States and China – the world’s two largest economies – is expected to add 0.2 percentage points to global growth this year by lowering tariffs and boosting business confidence. The global economy is recovering from some temporary setbacks, including new technology products and new emission standards that have hampered car production.
Nevertheless, the IMF warns that the global economy is facing a number of risks, including the possibility of renewed trade tensions. And many countries are not benefiting from the moderate rise in growth.
Even in the United States, the IMF has forecast growth to slow to 2.3 percent this year from 2.3 percent in 2019 and 1.7 percent in 2021, in part because President Donald Trump’s 2017 tax cuts are dampening the momentum in the economy.
According to the report, economic growth in Canada is forecast to be 1.8 percent in 2020 and 2021, unchanged from the October estimate.
China’s economy will continue to slow, the IMF predicts – from 6.1 percent last year to 6 percent in 2020 and 5.8 percent the following year. While China’s economy is likely to benefit from a ceasefire with the United States, Beijing continues to undergo a difficult transition from rapid economic growth based on wasteful and indebted energy investments to slow but steady growth built on the country’s growing middle class spending. .
Similarly, Japan’s economic growth, hampered by an aging workforce, is expected to slow to 0.7 percent this year from 0.5 percent last year and 0.5 percent next year.
Collective growth in the 19 countries that use the euro currency is expected to grow slowly: 1.2 percent in 2019, 1.3 percent in 2020 and 1.4 percent in 2021.
The IMF’s global forecast for October is slightly lower than the previous one, mainly due to the sharp recession expected in India: the world’s seventh-largest economy is expected to grow 5.8 percent this year, less than the 7 percent expected by the IMF in October, and 2021. 6.5 percent, lower than the previous forecast of 7.4 percent In addition, problems in the financial sector have reduced credit, reducing consumer spending in India.
Paul Wiseman, Associated Press