International Monetary Fund cuts India's FY20 GDP growth forecast to 6.1% from 7%

Clay Curtis
October 15, 2019

The IMF trimmed its 2019 growth forecast for China today as the USA trade war and weak demand at home take a toll on the world's second-largest economy.

IMF's growth rate cut comes after the World Bank slashed India's projected growth rate to 6 per cent in 2019 from 6.9 per cent in 2018.

The report warned that the global economy is experiencing "a synchronized slowdown and uncertain recovery".

"At 3% growth, there is no room for policy mistakes and an urgent need for policymakers to cooperatively deescalate trade and geopolitical tensions", it said. Investors are awaiting more clarity on whether a breakthrough in the U.S.

The forecasts set a gloomy backdrop for the IMF and World Bank annual meetings this week in Washington, where the Fund's new managing director, Kristalina Georgieva, is inheriting a range of problems, from stagnating trade to political backlash in some emerging market countries struggling with IMF-mandated austerity programs.

The IMF said that South Africa is projected to grow by 0.7% in 2019 - well below the 3.9% combined forecast for other emerging market and developing economies. It would be the weakest year since global growth was a negative 0.1% in 2009 as the global economy struggled with the shockwaves from the 2008 financial crisis. -China talks last week will ease global uncertainties.

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Growth in other major Asian economies - including India - was also slowing.

But she was cautious about President Donald Trump's announcement on Friday of a "Phase 1" US trade deal with China, saying that more details were needed about the "tentative" deal. The World Bank's previous projection for India was 7.5 per cent, and this was announced in April.

Gopinath warned that trade barriers and heightened geopolitical tensions, including Brexit-related risks, could further disrupt supply chains and hamper confidence, investment, and growth. She has said her first priority is to help member nations lower the risk of crises and cope with potential downturns.

Growth in Germany, Europe's biggest economy, is expected to be a modest 0.5% this year before rising to 1.2% next year.

About half of this is driven by recoveries or shallower recessions in stressed emerging markets, such as Turkey, Argentina, and Iran, and the rest by recoveries in countries where growth slowed significantly in 2019 relative to 2018, such as Brazil, Mexico, India, Russia, and Saudi Arabia, the International Monetary Fund chief economist said. It is now projected to grow at 6.1 per cent as against 6.6 per cent in 2018. This year's United Kingdom growth forecast was reduced to 1.2%. Georgieva said last week that this translates to a loss of $700 billion, or the equivalent of making Switzerland's economy disappear.

This is expected to increase to 1.1% in 2020.

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