IMF says the outlook for the global economy ‘remains sluggish’ as it cuts growth forecasts

The International Monetary Fund (IMF) has become less optimistic about global growth, warning that the outlook remains sluggish and there are no clear signs of a turning point. The Washington-based institution forecast in October a global growth rate of 3% for 2019 and of 3.4% for 2020. The IMF has now revised down those forecasts to 2.9% and 3.3%, respectively. The downward revision was mostly due to lower growth in India. For 2021, the Fund has forecast a growth rate of 3.4%.

The U.S. signed a “phase one” trade deal with China last week. Though the deal has kept some of the existing trade tariffs, it was interpreted as a truce by markets in the heated dispute that started back in 2018. Meanwhile in the U.K., lawmakers have approved an agreement that outlines how the country will leave the European Union, scheduled for January 31. The approval allows the U.K. to avoid an abrupt breakup from the EU later this month and gives more certainty to business and citizens on both sides of the English Channel, at least until the end of 2020.

However, the IMF is cautious about the state of the global economy going forward, in particular about further trade tensions. “New trade tensions could emerge between the United States and the European Union, and U.S.-China trade tensions could return,” Gopinath said. The trade relationship between the EU and the U.S. has deteriorated since President Donald Trump was elected in 2016 and ended negotiations between both sides of the Atlantic. Trump has said that Europe is “possibly just as bad as China” when it comes to trade and called it a “brutal” trading partner.