The Econ-versation: International Monetary Fund projects global growth

Silvia Buonocore, Senior Writer

The International Monetary Fund (IMF), an international organization with goals of improving the global macroeconomy, released a report on Monday projecting global growth. These growth projections are determined by changes in the gross domestic product (GDP) — a measure of final goods and services produced by a country over a certain time period.

The IMF predicts that global growth will rise from 2.9 percent in 2019 to 3.3 percent in 2020, and 3.4 percent in 2021. Compared to October 2019’s world economic outlook projections, the 2021 projection has been lowered by 0.2 percent and the 2020 projection by 0.1 percent due to social unrest and various unforeseen changes in the economy.

The organization’s outlook for market sentiment is more optimistic, as slowdowns in manufacturing and global trade are expected to improve. These improvements, alongside increased accommodative monetary policy, United States trade negotiations with China, and reduced concerns surrounding Brexit, are predicted to boost market sentiment.

The IMF also states “high frequency indicators for the fourth quarter tentatively suggest momentum stabilized at a sluggish pace.” This stabilization is attributed to accommodative monetary policy and fiscal easing in countries such as the United States and China, as well as a decrease in factors that slowed global manufacturing such as new emissions standards and inventory accumulation.

Growth in the United States is projected to decrease to two percent in 2020 and 1.7 percent in 2021 from 2.3 percent in 2019, partly due to an equaling out between government spending and tax revenue, known as fiscal neutrality.

Growth in the Eurozone is expected to increase from 1.2 percent in 2019 to 1.3 percent in 2020 and 1.4 percent in 2021. The 2020 prediction was decreased by 0.1 percent compared to October 2019’s world economic outlook projections due to slowed manufacturing in Germany as well as a decrease in exports and domestic demand in Spain.

Other notable growth projections include India, whose growth is expected to increase from 4.8 percent in 2019 to 5.8 percent in 2020 due to monetary and fiscal stimulus. Additionally, Latin America’s growth is expected to recover from approximately 0.1 percent in 2019 to 1.6 percent in 2020 and 2.3 percent in 2021.

Risks to future growth include the direction of tensions between the United States and Iran, the outcome of the trade negotiations between the United States and China, and potential natural disasters.

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