On Tuesday, the IMF has portrayed a slowing growth forecast for the current year. It says that economic growth is slowing down.
It is expected that global growth would grow by 3.3 percent. The IMF has downgraded the growth rate from 3.5 percent. However, for the year 2020, it is expected that the global economy would improve to 3.6 percent growth.
There are many reasons cited by the IMF for this decline. The U.S.-Mexico and Canada Agreement (USMCA) will be replacing the North Atlantic Free Trade Agreement which currently exists. The deal was signed on Nov 30, but it has not got the Congressional approval as yet.
Similarly, the U.S., China trade deal is yet to be finalized as both countries are still negotiating on various critical issues. Issues like technology transfer and data usage are still some sticky points that have not been resolved.
However, the IMF states that these differences have to be resolved soon. Tariff barriers are already hurting the global economies and if it extends, it would lead to escalating costs in importing goods, which would, in turn, affect the consumers.
Canada and Mexico are two major trade partners and they make up 30 percent of U.S global trade. Similarly, China accounts for almost 16 percent of the U.S. global trade, according to the Census Bureau.
IMF says that high trade policy would decrease business investment and disrupt the global supply chains. Productivity growth would decrease consequently, which in turn would slow down the world trade.
The IMF has pointed to the monetary policy by the Federal Reserve as another reason for economic growth slowdown. The Fed had increased the interest rates four times in 2018, but for 2019, no such interest rate hike can be expected by the Fed.
Political uncertainty and Brexit deal are other factors that are playing a significant role in slowing growth.
