No-deal Brexit could tip United Kingdom and European Union into recession, International Monetary Fund says

Daniel Fowler
April 10, 2019

'This is a delicate moment for the global economy, ' Gita Gopinath, the IMF's chief economist, said at a news conference, while cautioning that the fund does not foresee an worldwide recession.

Growth for 2018 was revised down by 0.1 percentage point relative to the October 2018 World Economic Outlook (WEO), reflecting weakness in the second half of the year, and the forecasts for 2019 and 2020 are now marked down by 0.4 percentage point and 0.1 percentage point, respectively.

"Furthermore, the outlook for US-China trade tensions has improved as the prospects of a trade agreement take shape", said IMF's economic counselor Gita Gopinath. In its previous forecast in January, the IMF had predicted that worldwide growth would reach 3.5 per cent this year.

More than two-thirds of the expected slowdown in 2019 owes to trouble in rich nations.

The euro area economy lost more momentum than expected as consumer and business confidence weakened and vehicle production in Germany was disrupted by the introduction of new emission standards; investment dropped in Italy as sovereign spreads widened; and external demand, especially from emerging Asia, softened. The next year growth rate forecast by the fund was generally in line with 2.7pc growth projected by the World Bank a day earlier. It was largely expected but it's a reminder that the entire reversal in market sentiment was based on a turn in central banks, not a turn in the real economy.

The government has already shared its stabilisation and growth strategy along with all the macroeconomic data with the International Monetary Fund that is believed to have become the basis of Pakistan's economic outlook over the programme period and beyond.

This lower projection is due to lower global expansion in the second half of 2018 caused by U.S.

The IMF said it expected the kingdom's growth, which reached 2.2 percent past year, to stabilise at a modest rate in the medium term due to the subdued outlook for oil prices and output. On the other hand, economic growth in China, despite fiscal stimulus and no further increase in tariffs from the U.S. relative to those in force as of September 2018, is projected to slow on an annualised basis in 2019 and 2020. -China trade war had not materialized.

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Conditions have eased in 2019 as the US Federal Reserve signalled a more accommodative monetary policy stance and markets became more optimistic about a US-China trade deal, but they remain slightly more restrictive than in the fall.

Still, America's ongoing tensions with China and other major trading partners continue to cloud the global economy.

United States tariffs on Chinese imports are hitting Chinese growth and also weighing on Latin America and other areas dependent on Chinese demand for commodities.

What is the IMF Global Economic Outlook report?

Canada is barely addressed in the text of the report, although it did note that the country would be one of the biggest beneficiaries if the USA continues to apply tariffs to products from China. China responded with retaliatory tariffs on USA goods.

The IMF said that to secure its growth prospects, it is essential that India continues to implement structural and financial sector reforms and makes an effort to reduce public debt through continued fiscal consolidation.

In an ominous sign, the International Monetary Fund said Beijing might need to unleash fiscal stimulus "to avoid a sharp near-term growth slowdown that could derail the overarching reform agenda".

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