World economy forecast to slow in 2019 amid trade tensions

President Trump speaks at the White House on Saturday

Growth forecast for the U.S. remains unchanged, the IMF said, adding that it is expected to decline to 2.5 percent in 2019 and soften further to 1.8 percent in 2020 with the unwinding of fiscal stimulus and as the federal funds rate temporarily overshoots the neutral rate of interest.

Underscoring the wobbly state of the global economy: China, the world's second-biggest economy, on Monday reported 2018 growth of 6.6 percent, the weakest since 1990.

The IMF said Monday that it expects global growth this year of 3.5 per cent, down from 3.7 per cent in 2018 and from the 3.7 per cent it had forecast for 2019 back in October.

A no deal Brexit would be a blow to the entire global economy because of the turmoil it would cause, International Monetary Fund chief economist Gita Gopinath.

The slowing growth in China, and across the world, was partly due to the US-China trade war and the billions of dollars in tariffs they have imposed on each other.

While the downward revisions were "modest", she said.

The global growth forecast for 2020 is 3.6 percent, 0.1 percentage point lower than previously forecast.

The WEO also forecast 1.5 percent 2019 growth for Britain, the same as in October, but warned the estimate is fraught with uncertainty since "as of mid-January, the shape that Brexit will ultimately take remains highly uncertain". The IMF has projected the economy will expand at 7.7% in 2020-21.

The World Bank and the Organization for Economic Cooperation and Development have also downgraded their world growth forecasts.

Speaking to India Today TV, Lagarde further said that it is a good sign that the projected growth is high but the government needs to address the crisis in the agriculture sector as a large number of people depend on this sector. Despite the fiscal stimulus that offsets some of the impacts of higher U.S. tariffs, China's economy will slow down due to the combined influence of needed financial regulatory tightening and trade tensions with the US.

Us traders returned from a low on weekend to risk-off markets conditions with futures already in the red. "These potential triggers include a "no-deal" withdrawal of the United Kingdom from the European Union and a greater-than-envisaged slowdown in China". "Trade tensions that we have seen over the past year - the tremendous amount of uncertainty with respect to trade policy going forward - this is a very important down-side risk that we are flagging".

The IMF noted that in some economies, addressing high private debt burdens and balance-sheet currency and maturity mismatches would require strengthening macroprudential frameworks. Nevertheless, the projected pace of expansion is above the United States economy's estimated potential growth rate in both years.

The hiring plans suggest that the UK's unemployment rate could drop further from its near-record low of 4.1 per cent.

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