The outlook for the global economy goes from bright to precarious. Increasing like the pains of a woman in labor.
Wed 10 Apr 2019 21.31 EDT. Last modified on Wed 10 Apr 2019 22.10 EDT. The Guardian.
The IMF has downgraded forecasts for economic growth across the world in its latest world economic outlook released this week. The report should provide sobering reading for both major parties ahead of the federal election as a substantial slowdown in the world economy could severely affect revenue forecasts and the ability to deliver spending commitments and tax cuts while also balancing the budget.
Should you be after a quick taste for how the world economy has been tracking over the past 18 months, you could do worse than just peruse the titles of the past six IMF world economic outlook reports.
At the start of last year things were looking almost upbeat. The title of the IMF’s January update, Brighter Prospects, Optimistic Markets, Challenges Ahead, is economic speak for “cripes, aren’t we all a bit unusually happy!”. By April 2018 the title had become “Cyclical Upswing, Structural Change”, which again spoke of economic sunshine, even if it did warn of the need to adjust to the post-GFC world.
But such giddiness was not to last.
By the middle of last year the July update was warning “Less Even Expansion, Rising Trade Tensions”, and the October outlook was a decidedly measured if still somewhat neutral, “Challenges to Steady Growth”.
But with this new year, all neutrality has disappeared. The January update stated it plain: “A Weakening Global Expansion”. And just in case you had not caught their drift, the latest outlook, released this week, was headed, “Growth Slowdown, Precarious Recovery”
From brighter prospect to precarious recovery in less than two years. Hope you enjoyed that moment of economic joy while it lasted.
The decline is across roughly 70% of the world’s economies, with the IMF blaming the “escalation of US–China trade tensions”, troubles in the “auto sector in Germany” plus “tighter credit policies in China, and financial tightening alongside the normalization of monetary policy in the larger advanced economies.”
In effect the structural changes and rising trade tensions warned in previous outlooks all came to pass. As a result the forecast for world GDP this year has been cut from 3.9% this time last year to just 3.3%: