World suffering 'synchronised slowdown', says new IMF chief; effect 'more pronounced' in India

WION New Delhi, Delhi, India Oct 09, 2019, 12.20 PM(IST)

Kristalina Georgieva Photograph:( Reuters )

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The speech comes ahead of next week's annual meeting of the IMF and World Bank during which both the organisation are set to present the global economic outlook.

International Monetary Fund's chief Kristalina Georgieva on Tuesday painted a grim picture of the world economy as she warned about 'synchronised slowdown'. She also said that nearly 90 per cent of the world will witness slower growth in 2019.

"Two years ago, the global economy was in a synchronised upswing. Measured by GDP, nearly 75 per cent of the world was accelerating. The global economy is now in a synchronised slowdown. In 2019, we expect slower growth in nearly 90 per cent of the world," said Georgieva.

The speech comes ahead of next week's annual meeting of the IMF and World Bank during which both the organisation are set to present the global economic outlook.

Georgieva also said that the effect of the slowdown is more pronounced in some of the largest emerging market economies like India.

"In the United States and Germany, unemployment is at historic lows. Yet across advanced economies, including in the US, Japan, an especially the euro area, there is a softening of economic activity. In some of the largest emerging market economies, such as India and Brazil, the slowdown is even more pronounced this year," Georgieva also said.

The IMF had cut its projection for India's economic growth by 0.3 percentage points to 7 per cent for the fiscal year 2019-20 owing to the "weaker-than-expected outlook" for the domestic demand.

Watch: IMF's Lagarde warns of 'growing concerns' over trade tensions

The IMF's research also takes into account the US-China trade conflict, which could have long-term repercussions.

 "We have spoken in the past about the dangers of trade disputes. now, we see that they are actually taking a toll. Global trade growth has come to a near standstill. In part because of the trade tensions, worldwide manufacturing activity and investment have weakened substantially. There is a serious risk that services and consumption could soon be affected, " Georgieva said.

"Even if growth picks-up in 2020, the current rifts could lead to changes that last a generation - broken supply chains, siloed trade sectors, a 'digital berlin wall' that forces countries to choose between technology systems," she added.

She highlighted that trade conflicts could lead to a loss of a whopping seven-hundred billion dollars from the global GDP output by 2020.

Speaking about the monetary policy, Georgieva said that central banks need to keep their interests low, especially due to low inflation and weak growth.

However, she also said that there was limited scope for further cuts because the borrowing were already nearly zero or negative.

Kristalina Georgieva took over as IMF's managing director on October 1 after Christine Lagarde resigned.

Georgieva is the former chief executive officer of World Bank.