Is this a new warning sign announcing an upcoming recession after the recent but temporary inverted U.S. yield curve? Rarely have the forecasts of the International Monetary Fund (IMF) experienced such a change in just one year after it has reduced forecasts again for global economic growth.
Anticipating 3.3 percent growth for 2019 and 3.6 percent for 2020 instead of a forecast of 3.9 percent issued in 2018 for both years, only China would outperform with a tenth of a percentage point more since the previous forecast.
In the euro area, Germany and Italy fell by half a point within a difficult business context while the announcement of a Sino-US agreement is delayed. “The balance of risks remains skewed to the downside,” the IMF explained.
“Failure to resolve differences and a resulting increase in tariff barriers above and beyond what is incorporated into the forecast would lead to higher costs of imported intermediate and capital goods and higher final goods prices for consumers,” said its report.
“The Fed’s reversed stance in recent months has also increased the feeling that growth depends more than expected on low interest rates, dovish policies from central banks, add to that some political implication like Donald Trump’s criticisms of Jerome Powell and you have a context that generates tension and uncertainty,” Cyceon underlines.