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IMF: World Economy Expands Next 2 Years; Growth Fades After 2020

International Monetary Fund experts say the global economy will continue growing well for the next two years, but expect expansion to slow after 2020.

IMF research director Maurice Obstfeld said Tuesday fading trade could hurt growth and, “The first shots in a potential trade war have now been fired.” He repeated a warning the international rules that nurtured “unprecedented” economic growth after World War II are at risk of being “torn apart.”

Many economists worry that Trump administration efforts to slap tariffs on China and other U.S. trading partners are sparking retaliatory taxes on U.S.-made products that raise the cost of trading and hurt demand, stifling economic growth. Administration officials disagree, and insist their trade and tax policies will boost growth and not spark soaring deficits.

Trade squabbles are a key issue this week as top economic officials and experts gather from 189 nations in Washington for meetings of the IMF and the World Bank.

Obstfeld and his colleagues are also worried that efforts to stimulate economic recovery from the 2008 recession, such as low interest rates and massive purchases of bonds, are now ending. They put the current global growth rate at 2.9 percent, and say this moment of good growth is the time to make changes in tax and other policies that will help economies weather inevitable future downturns.

Growth in advanced economies like the United States is hampered by an aging population with larger numbers of people retiring and leaving the workforce. Slow growth in productivity and high levels of government and private debt are also threats to future growth.

The IMF predicts the world’s second-largest economy, China, will expand at a 6.6 percent rate this year and 6.4 percent in 2019. The global lender says China will continue changing its economic focus from investment and manufacturing toward consumption and services, but warns that a rising debt clouds the nation’s medium-term outlook.

 

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