Despite rising trade volatility, political uncertainty and a global manufacturing slowdown, the International Monetary Fund does not have a recession in its baseline forecast.
In its World Economic Outlook report for October, the IMF projected the global economy to expand 3.0% in 2019, a 0.3-percentage-point downgrade from the previous forecast in April.
The IMF expects growth to pick up to a "modest" 3.4% in 2020, a 0.2% downgrade from April, before improving to a "slightly higher" rate in 2021-24.
Gita Gopinath, the director of the IMF's research department, said during an Oct. 15 press conference that global growth has not yet dropped to recession levels.
"If global growth were to go below 2.5%, that's usually a scenario where there are several countries in a recession, but that's, however, not in our baseline," Gopinath said when asked about global recession risks.
Trade tensions between the U.S. and China will cumulatively reduce global GDP by 0.8% by 2020, according to IMF Managing Director Kristalina Georgieva.
For 2019, the IMF lowered its growth forecast for advanced economies to 1.7% from a 1.8% estimate in April. The growth outlook for the U.S. was raised to 2.4% from 2.3%.
Monetary policy boost
Monetary policy by major central banks deserves credit for supporting global growth, according to the IMF, which estimates that global growth in both 2019 and 2020 would be lower by 0.5 percentage point in the absence of monetary stimulus.
But that boost is not without risks. A continued period of low interest rates does pose a threat to the global economy, given high levels of corporate debt and the continued search for yields in a low-to-negative interest rate world.
As a result, monetary easing cannot be the only tool used to combat slowing global growth.
"Monetary policy cannot be the only game in town," Gopinath said. "It should be coupled with fiscal support where fiscal space is available and fiscal policy's already not too expansionary."
Gopinath said buoyant labor markets, healthy wage growth and consumption have been largely held up by the services sector, although services show "some initial signs of softening" in both the United States and euro area.
International risk factors
The growth forecast for the euro area for next year was revised down to 1.2% from 1.3%, while the growth estimate for the U.K. economy was unchanged at 1.2%.
In the event of a no-deal Brexit, the U.K. economy could face a reduction in GDP between 3% and 5% over a two-year period, according to Gopinath. The IMF does not include a no-deal Brexit in its baseline.
The IMF also lowered its 2019 growth forecasts for China and Japan to 6.1% and 0.9%, respectively, from 6.3% and 1.0%.
The growth outlook for emerging market and developing economies for next year was cut to 3.9% from 4.4%.