Falling Investments, Rising Trade Barriers Bring Down Global Growth

The global economy is slowing down. Will it fall further?

- Tushar K Mahanti

The International Monetary Fund’s (IMF) new Managing Director, Kristalina Georgieva, warned that the slowdown is posing a “serious risk”. The IMF has downgraded the global GDP growth to 3% for 2019 - the slowest since the global financial crisis of 2008.

World GDP growth slowing down

The IMF’s latest World Economic Report (October 2019) suggests that this subdued growth is the result of rising trade barriers, elevated uncertainty around trade and geopolitics, and idiosyncratic factors causing macroeconomic strain in several emerging market economies. Structural factors, such as low productivity growth, and aging demographics in advanced economies are also affecting macroeconomic stability.

Global GDP growth is projected to pick up to 3.4% in 2020, based primarily on projected improvement in economic performance in emerging markets in Latin America, West Asia, and emerging and developing Europe that are under macroeconomic strain. Alongside this, a projected slowdown in China and in the United States, portends further slowdown in 2020, the IMF cautioned.

The World Bank has appeared even more pessimistic and has downsized the global growth to 2.6% for 2019 - 0.3 percentage point below its previous forecast, reflecting weaker-than-expected international trade and investment. Growth is projected to gradually rise to 2.8% by 2021 with prospects for improved global financing conditions, as well as a modest recovery in emerging market and developing economies.