IMF Sees Global Economic Growth Accelerating, U.S. Slowing Down

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The growth of the global economy will pick-up pace in 2020 and continue to accelerate the following year, the International Monetary Forum predicted Monday in a quarterly update to its World Economic Outlook.

Global gross domestic product will expand by 3.3 percent in 2020 and 3.4 percent in 2021, up from 2.9 percent in 2019, the Washington-based institution said. The predictions were released in Davos, Switzerland where the World Economic Forum is beginning its annual conference.

The new projections are slightly lower than those in the prior report, which saw growth in 2019 coming in a 3.0 percent and 3.4 percent in 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 previous report, the IMF said.

At the same time, the IMF forecasts that growth in the United States will slow from 2.3 percent in 2019 to 2 percent in 2020 and fall to 1.7 percent in 2021. Tighter monetary policy from the Federal Reserve and less support for growth from fiscal policy, meaning tax cuts, is cited as the cause of the slowdown.

The results could give a boost to Donald Trump’s push for another round of tax cuts and his argument that the Fed should further cut interest rates to support faster economic growth.

 

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