IMF Says Trade War Will Cut  Global Growth to Lowest Since Financial Crisis a Decade Ago

The US-China trade war will cut 2019 global growth to its slowest pace since the 2008-2009 financial crisis, the International Monetary Fund warned on Tuesday, adding that the outlook could darken considerably if trade tensions remain unresolved.

The IMF said its latest World Economic Outlook projections show 2019 GDP growth at 3.0%, down from 3.2% in a July forecast, largely due to increasing fallout from global trade friction.

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 World Economic Outlook report spells out in sharp detail the economic difficulties caused by the US-China tariffs, including direct costs, market turmoil, reduced investment and lower productivity due to supply chain disruptions.

The global crisis lender said that by 2020, announced tariffs would reduce global economic output by 0.8%. Georgieva said last week that this translates to a loss of $700 billion, or the equivalent of making Switzerland’s economy disappear.

For 2020, the Fund said global growth was set to pick up to 3.4% due to expectations of better performances in Brazil, Mexico, Russia, Saudi Arabia, and Turkey. But this forecast was a tenth of a point lower than in July and was vulnerable to downside risks, including worse trade tensions, Brexit-related disruptions and an abrupt aversion to risk in financial markets.

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