KYODO – The International Monetary Fund on Tuesday forecast world economic growth of 3.0 percent in 2019, its lowest level in a decade, amid the prolonged U.S.-China trade war, while leaving its growth forecast for Japan unchanged at 0.9 percent.
In its latest World Economic Outlook, the IMF cut its global economic growth projections for this year by 0.2 percentage point, marking the slowest pace of increase since 2009 in the aftermath of the global financial crisis, and for 2020 by 0.1 point to 3.4 percent, compared with its estimates in July.
“A notable feature of the sluggish growth in 2019 is the sharp and geographically broad-based slowdown in manufacturing and global trade,” the Washington-based institution said in its report, adding that U.S.-China trade tensions, which have escalated into a tit-for-tat tariff war, have hurt business sentiment and confidence globally.
In the first half of this year, the volume of world trade increased only 1 percent from a year earlier, the slowest pace of growth for any six-month period since 2012. The IMF slashed its growth projections for trade in goods and services to 1.1 percent in 2019 and 3.2 percent in 2020, down 1.4 point and 0.5 point, respectively, from its July forecasts.
China, where growth has slowed, was among the major contributors to the weakening of global imports, according to the IMF. China’s growth was forecast at 6.1 percent in 2019 and 5.8 percent in 2020, revised down 0.1 and 0.2 point, respectively, from earlier estimates.
“In China, the growth downgrade reflects not only escalating tariffs but also slowing domestic demand following needed measures to rein in debt,” the report said.
As for Japan, strong private consumption and public spending are expected to help the economy grow 0.9 percent in 2019, the IMF said.
In 2020, economic growth is projected to slow to 0.5 percent, upgraded 0.1 point compared with the estimate in July, as a likely decline in private consumption following a consumption tax hike earlier this month is expected to be cushioned by temporary fiscal measures, it said.
Growth estimates for the United States were revised down by 0.2 point to 2.4 percent for this year and upgraded by the same margin to 2.1 percent in 2020.
The IMF also said significant monetary easing seen almost simultaneously across advanced and emerging economies, including the United States, has helped offset the negative impact of the U.S.-China trade war.
But it also warned that the outlook remains “precarious,” with a further rise in tensions between the world’s two largest economies and the U.K. leaving the European Union without a trade deal among the potential risks.
The IMF said trade policy uncertainty and barriers have risen “more broadly,” citing a dispute between Japan and South Korea over Tokyo’s tightening of export controls earlier this year. Seoul views Tokyo’s move as retaliation for South Korean court rulings ordering Japanese companies to pay compensation for wartime forced labor.
Japan’s measures included tighter controls on exports of some materials needed by South Korean manufacturers of semiconductors and display panels, such as Samsung Electronics Co. and SK Hynix Inc.
“While these restrictions have had limited effects so far, an escalation of tensions could affect both economies significantly, with regional repercussions through technology sector supply chains,” the IMF report said.