The new head of the International Monetary Fund (IMF) said Tuesday that the global economy was experiencing a "synchronised slowdown" with nearly 90 per cent of the world witnessing slower growth in 2019. IMF Managing Director Kristalina Georgieva said the slowdown was "more pronounced" in some of the largest emerging economies, including India and Brazil.
"In 2019, we expect slower growth in nearly 90 per cent of the world. The global economy is now in a synchronised slowdown. This means that growth this year will fall to its lowest rate since the beginning of the decade," Georgieva, who took over as Managing Director of the body on October 1, said.
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"In some of the largest emerging market economies, such as India and Brazil, the slowdown is even more pronounced this year," she added.
Georgieva attributed the slowdown to a range of uncertainties — she called them "fractures" — including trade tensions, Brexit and geopolitical tensions.
She said trade tensions could result in "substantial weakening" of manufacturing and investment activity, and could subsequently affect services and consumption.
"Everyone loses in a trade war. For the global economy, the cumulative effect of trade conflicts could mean a loss of around $700 billion by 2020, or about 0.8 per cent of GDP. As a reference, this is approximately the size of Switzerland’s entire economy," she said.
Georgieva compared the present scenario to that of two years ago, before the US-China trade war, when countries representing nearly 75 per cent of the world's output were seeing accelerating growth.
She called for a "coordinated" response to the slowdown. "The world economy is still growing, it is just growing too slowly. To reverse this trend, and meet the aspirations of people, we cannot afford to be complacent. We must act," she said.
The IMF chief warned that they current rifts could lead to "changes that last a generation", including "broken supply chains, siloed trade sectors, a 'digital Berlin Wall' that forces countries to choose between technology systems".
In her first speech, Georgieva referred to new research by the IMF that will be unveiled during the IMF and World Bank annual meetings next week. The research takes into account the US's planned tariffs on Chinese imports.