As the self-inflicted wounds of the trade war between the U.S. and China have made for a “precarious” economic state, the International Monetary Fund (IMF) said worldwide growth is slated to drop to its slowest rate since the global recession in 2009.
Tariffs have cooled investment and business confidence, which has forced central banks to reduce interest rates and left the worldwide trade in goods nearly stagnant, the Financial Times reported.
“With central banks having to spend limited ammunition to offset policy mistakes, they may have little left when the economy is in a tougher spot,” said Gita Gopinath, the fund’s chief economist. “As policy priorities go, undoing the trade barriers put in place with durable agreements and reining in geopolitical tensions top the list.”
The IMF said there is a need for immediate attention to stop hostilities as well as bring back confidence to the worldwide view. In 2019, the world economy will grow at just 3 percent per the organization’s estimate. That figure is lower than the 3.8 percent as recently as 2017 and 0.3 percentage points lower than its equivalent forecast half a year prior.
The IMF said the trade wars begun early last year by the United States will have global output next year 0.8 percent lower than it could have been in the event more internationalist policies had been adhered to. The output would have been 0.5 percent weaker had the central banks of the globe not quickly moved to loosen monetary policy.
In April, reports surfaced that the IMF had unveiled a forecast about global economic growth that showed the global economy was faltering. The IMF cut its 2019 outlook for growth to 3.3 percent, which was lower than 3.5 percent at the beginning of the year and 3.7 percent in October 2018, in its report.
The decline can be felt all over the world in every advanced economy, the report said per news at the time, and most emerging markets were to reportedly feel the decline as well.