Davos, Jan 20 : Global growth will rise to 3.3 per cent in 2020 from an estimated 2.9 per cent in 2019 and 3.4 per cent in 2021, the International Monetray Fund said on Monday, revising downward its previous estimate three months back.
The latest projections are 0.1 percentage point lower for 2019 and 2020 and 0.2 percentage point lower for 2021 from its previous estimates published in the World Economic Outlook (WEO) in October. The reassessment of growth prospects over the next two years has been due to what the Fund said "negative surprises" to economic activity in a few emerging market economies, notably India.
"In the third quarter of 2019, growth across emerging market economies (including India, Mexico, and South Africa) was weaker than expected at the time of the October WEO, largely due to country-specific shocks weighing on domestic demand," said the IMF in an update released ahead of the World Economic Forum meeting here on Tuesday.
Trade policy uncertainty, geopolitical tensions, and idiosyncratic stress in key emerging market economies continued to weigh on global economic activity—especially manufacturing and trade —in the second half of 2019. Intensifying social unrest in several countries posed new challenges, as did weather-related disasters—from hurricanes in the Caribbean, to drought and bushfires in Australia, floods in eastern Africa, and drought in southern Africa.
Despite these headwinds, the multilateral lender said, some indications emerged toward the year-end that global growth may be bottoming out. Moreover, monetary policy easing continued into the second half of 2019 in several economies. Adding to the substantial support the easing provided earlier in 2019, its lagged effects should help global activity recover in early 2020.
On the positive side, market sentiment has been boosted by tentative signs that manufacturing activity and global trade are bottoming out, a broad-based shift toward accommodative monetary policy, intermittent favorable news on US-China trade negotiations, and diminished fears of a no-deal Brexit, leading to some retreat from the risk-off environment that had set in at the time of the October WEO.
However, few signs of turning points are yet visible in global macroeconomic data, it said. Downside risks remain prominent, including rising geopolitical tensions, notably between the United States and Iran, intensifying social unrest, further worsening of relations between the United States and its trading partners, and deepening economic frictions between other countries.(UNI)