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IMF cuts global economic growth to 3.3%: China is the only country that raised expectations

Apr. 11, 2019

On the 9th, the International Monetary Fund (IMF) lowered its forecast for global economic growth in 2019 to 3.3%. This is the second time the IMF has lowered this year, the lowest level since the 2008 financial crisis. However, the IMF expects the global economic situation to return to warm again after the second half of this year.


Among them, the economic growth rates of the four major economies of the United States, the euro zone, Japan and India have all been lowered. However, the IMF is more optimistic about the Chinese economy and will raise China's economic growth forecast by 0.1 percentage point this year to 6.3%.

The IMF said that in the context of weakening global economic momentum and limited policy response space, it is important to avoid policy errors that undermine economic activity.


Lowering global economic growth expectations again


On April 9, the International Monetary Fund (IMF) released the latest issue of the World Economic Outlook Report, which lowered the global economic growth forecast for 2019 to 3.3%, 0.2 percentage points lower than the January forecast.


The IMF pointed out in the report that global economic growth has slowed down since the second half of last year due to multiple factors such as global trade tensions, tightening of the financial environment and rising policy uncertainty. However, the IMF predicts that 70% of the global economy will decline in 2019. However, the global economy is expected to gradually rebound in the second half of 2019, and will rebound to 3.6% in 2020. The supporting factor is that the major economies can still Implement a large-scale easing policy.


However, the overall situation is still not optimistic, IMF chief economist Gopinate said that the current global economy is in a period of fragility, the most critical risks include the Brexit and the trade confrontation between the United States and the European Union that is slowly kicking off. Etc. and confirmed that the US economy is also slowing as the effects of fiscal stimulus are fading.


Among them, the IMF expects the world's largest economy, the US economic growth rate in 2019, to be lowered from 2.5% in January to 2.3%, but will increase its growth forecast for next year by 0.1 percentage point to 1.9%, still relatively strong. The economic growth forecast for the euro zone this year and next is reduced by 0.3 and 0.2 percentage points to 1.3% and 1.5% respectively. In addition, the economic growth rates of the two major economies of Japan and India are all lowered.


On April 2nd, IMF Managing Director Lagarde also mentioned in the American Chamber of Commerce that the global economy has lost further growth momentum and the economic growth rate will be lower than expected. At the same time, however, many central banks have adopted the pace of monetary normalization, and some countries have also increased stimulus measures. Economic growth may rebound to some extent in the second half of this year.

The IMF also warned that the global economy continues to grow at a reasonable rate. Although it does not show a global recession, there are many downside risks. Given these risks, the IMF recommends that it is imperative for countries to avoid costly policy mistakes.


It is worth noting that China is the only country in the major economies that has been raised its economic growth forecast. The IMF raised China's economic growth forecast by 0.1 percentage points this year to 6.3%, while China's economic growth is expected to be 6.1% next year.


The IMF acknowledged China's previous actions to de-leverage and shrink shadow banking. However, due to the downward pressure on China's economy in 2018, China began to adopt a more active fiscal and monetary policy in the fourth quarter. The IMF acknowledged this, but also Emphasize that China should adhere to the economic rebalancing strategy in the future.


The IMF also made recommendations that the recent trade uncertainty has declined. China's policy should focus on economic rebalancing, increase consumption's driving force for economic growth, and make the growth model more sustainable. “Moderate central fiscal expansion is reasonable in 2019, and medium- and long-term should focus on direct transfer spending to low-income households,” the IMF said.


Recently, the signs of China's economic stabilization have begun to show. China's official manufacturing PMI recorded 50.5% in March, higher than the expected 49.6%, a significant increase from the 49.2% in February, a five-month high. The manufacturing PMI returned to the expansion range after three consecutive months below the critical point, reflecting an improvement in the overall economic climate.


The Chinese economy has shown a steady and good situation, and investors have also increased confidence in the Chinese stock market. The Shanghai Composite Index has risen by 30% this year, becoming the world's leading stock market leader, and overseas funds are constantly flowing into the A-share market.


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