The International Monetary Fund trimmed its forecasts for global economic expansion through 2021 amid tentative signs that growth momentum may be stabilizing at subdued levels.
Global GDP growth is now expected to accelerate to 3.3% in 2020 and 3.4% in 2021, the IMF said, from an estimated 2.9% expansion in 2019, the weakest rate since the financial crisis. The projected modest pickup in global growth is partly due to the reduced trade tensions between the U.S. and China and the increased possibility of an orderly Brexit, according to the IMF.
The growth forecasts for 2019 and 2020 were revised down by 0.1 percentage point each from the IMF's October forecast, while the outlook for 2021 was lowered by 0.2 percentage point. The IMF said the revisions reflected "negative surprises to economic activity" in some emerging markets, particularly India.
"There are preliminary signs that the decline in manufacturing and trade may be bottoming out," IMF Economic Counselor Gita Gopinath said, citing an improvement in the auto sector and the signing of U.S.-China "phase one" trade deal as growth boosters.
Still, the global outlook remains "sluggish" and there are "no clear signs of a turning point," Gopinath said as she called for stronger multilateral cooperation and national policies to support the economic recovery.
"Trade policy uncertainty, geopolitical tensions, and idiosyncratic stress in key emerging market economies continued to weigh on global economic activity — especially manufacturing and trade," the IMF said in latest World Economic Outlook report published Jan. 20.
The IMF expects advanced economies to expand 1.6% in 2020 and 2021. Growth in the U.S. is projected to decelerate to 2% and 1.7% in 2020 and 2021, respectively, from 2.3% in 2019, due to "a return to a neutral fiscal stance and anticipated waning support from further loosening of financial conditions," according to the IMF.
Eurozone growth is expected to pick up to 1.3% in 2020 and 1.4% in 2021, from 1.2% in 2019. For the U.K., the growth rates for 2020 and 2021 are estimated to be at 1.4% and 1.5%, respectively.
Economic expansion in the emerging market and developing economy group is forecast to come in at 4.4% in 2020 and 4.6% in 2021, up from an estimated 3.7% in 2019. "The growth profile for the group reflects a combination of projected recovery from deep downturns for stressed and underperforming emerging market economies and an ongoing structural slowdown in China," the IMF said.
China's GDP growth is forecast to slow to 6.0% and 5.8% in 2020 and 2021, respectively, from 6.1% in 2019.
Meanwhile, India, which accounted for a "lion's share" of the downward revisions to the overall global growth forecasts, is estimated to have grown 4.8% in 2019 amid sharper-than-expected stress in the nonbank financial sector and declining credit growth, the IMF said. The country's GDP growth is expected to pick up to 5.8% and 6.5% in 2020 and 2021, respectively.