Since the January 15 publication of IBO’s 2019 Annual Review and Forecast Issue, the International Monetary Fund (IMF) has issued an update to its October 2018 World Economic Outlook. The update, released earlier this month, revised its 2019 and 2020 forecast downwards. This was the Fund’s second projected downturn in three months, due to unresolved trade conflicts, as well as weakness in European and emerging markets. Overall, the IMF reduced its global economy forecast to 3.5% growth in 2019 and 3.6% growth in 2020, a decrease of 0.2 and 0.1 percentage points, respectively, from the Fund’s October 2018 projections.

After two years of steady growth, global economic development is decelerating while risks are rising. The slowing economic growth in China was cited by the IMF as being larger than expected, and the possible lack of a Brexit deal could further exacerbate already precarious market conditions. Also in Europe, new fuel emissions standards for cars have negatively impacted Germany, the leading exporter on the continent, as have market pressures caused by Italy’s budget discussions with the EU. The IMF decreased its European forecast by 0.3 percentage point to total 1.6% growth  in 2019 but kept its 1.7% projection for 2020.

The growth forecast for developing countries was also decreased, falling 0.2 percentage point to 4.5% for 2019. This decline is largely attributed to trade issues, capital outflows, unpredictable oil prices and growing US interest rates. Projections for 2020 held steady at 4.9%. In Latin America, economic growth is expected to rebound over the next two years to 2.0% in 2019 and 2.5% in 2020, a decrease of 0.2 percentage point. The downturns of economic growth in Latin American countries such as Argentina, Mexico and Venezuela, will be slightly offset by Brazil, which is on an upward recovery from its 2015–16 recession.

US growth projections remain unchanged by the IMF, which projects growth of 2.5% in 2019 and 1.8% in 2019, thanks to strong domestic demand. The UK’s forecasted growth stayed the same at 1.5% for 2019, contingent on an organized exit from the EU. China’s forecast also remained the same at 6.2% for the next two years, but the IMF warned that economic growth could fall short of this projection if trade conflicts continue. Economic growth in China slowed in fourth quarter 2018 due to unsteady domestic demand and tensions with the US over tariffs, which brought 2018 economic growth to the lowest levels in almost 30 years.

One of the few countries to receive an upward revision in its forecast was Japan, with the IMF increasing growth projections by 0.2 percentage point to 1.1% in 2019. The rise is a result of increased government fiscal measures, including initiatives to offset the effects of the consumption tax rate increase that is planned for October. India’s forecast was also increased by 0.1 percentage point to growth of 7.5% in 2019 and 7.7% in 2020, due to lower oil prices and a calming of inflation pressures.