The global growth reversal

In January 2018, coming off of a year in which global growth rose to near 4%, then-IMF managing director Christine Lagarde said the global economy was experiencing “the broadest synchronized global growth upsurge since 2010” and that “all signs point to a continuous strengthening.”

The latest: On Tuesday, the IMF said it expects global growth to slow to the weakest pace since the 2008 global financial crisis, noting the decline would be a significant drop from its 2017-18 levels.

• It was the third time this year the organization has cut its growth projections and the fourth time since 2018 when the Fund anticipated the global economy would grow 3.9% this year.

What we’re hearing: “With uncertainty about prospects for several of these countries, a projected slowdown in China and the United States, and prominent downside risks, a much more subdued pace of global activity could well materialize,” IMF chief economist Gita Gopinath said at a press conference announcing the Fund’s World Economic Outlook and revised projections.

The big picture: The biggest factor weighing on global growth is the U.S.-China trade war launched by President Trump in April 2018, which Gopinath and the IMF expect will cost the world 0.8% in GDP losses this year.

• Even its latest watered-down growth predictions are optimistic and rely on some against-the-grain expectations: that Brexit will be resolved in an orderly fashion, the U.S.-China trade war will wind down and other geopolitical conflicts will cool.

Watch this space: The 3% number is particularly important because Gopinath projects that if growth were to slow to 2.5%, “that’s a scenario where several countries are in recession.”

Threat level: The global economy already is in “a synchronized slowdown,” IMF managing director Kristalina Georgieva said at a recent news conference.

• TheIMF now expects slower growth in 90% of the world.

The bottom line: To keep the global economy from falling into a recession, “policymakers must undo the trade barriers put in place with durable agreements, rein in geopolitical tensions, and reduce domestic policy uncertainty,” Gopinath said.

• There are few who expect that to happen in the near future.

 
-Outlook for the phase 1 trade deal darkens

The outlook for a meaningful U.S.-China trade deal continues to deteriorate, as the U.S. House of Representatives passed a bill supporting protesters in Hong Kong and China reportedly backtracked on part of the deal it agreed to last week.

Details: The House bill would require an annual review of whether Hong Kong is truly separate from Beijing to the point that it justifies the special trading status it receives under U.S. law and would implement sanctions against officials “responsible for undermining fundamental freedoms and autonomy in Hong Kong.”

• Chinese officials unsurprisingly did not take the news well, accusing the U.S. of a “political plot” to thwart China’s development.
• The Chinese Ministry of Foreign Affairs said that it would take strong measuresagainst the U.S. if the bill passed.

On the agriculture front, Bloomberg reported that Chinese officials are seeking a rollback of $50 billion in tariffs before agreeing to raise purchases of U.S. agriculture to the $40-$50 billion range President Trump said was agreed to in the so-called phase 1 trade deal.

• China is willing to start buying more U.S. agricultural products immediately as part of the trade deal agreed to in principle last week, but is unlikely to reach $40 billion to $50 billion without sanctions relief, the report said, citing unnamed sources.

 
-Global uncertainty hits a 20-year high

Uncertainty over both global trade and the global economy is at its highest point in more than 20 years, the Institute of International Finance reports, citing the latest readings of the World Uncertainty Index.

• “It is a striking exhibit,” IIF deputy director Emre Tiftik tells Axios in an email. “Trade uncertainty is implicitly included in the global uncertainty. However, its weight in the global uncertainty is small. And one can conclude that the sharp rise in trade uncertainty is a major factor keeping global uncertainty at elevated levels.”

What it means: The index tracks the frequency of the word “uncertainty” in the quarterly Economist Intelligence Unit country reports. The World Uncertainty Index has spiked after the 9/11 attack, SARS outbreak and following the second Gulf War, the Euro debt crisis, El Niño, European border crisis, U.K. Brexit vote and the 2016 U.S. election.

 
Πηγή: axios.com