The International Monetary Fund (IMF) has cut its forecast for global financial and trade growth to the lowest levels seen since the financial crisis of 2008-9.
Issuing its latest World Economic Outlook report yesterday (October 15th 2019), the organisation predicted GDP growth this year would be just three per cent, down from the 3.2 per cent expected in July's forecast.
It attributed this slow pace largely to the tensions caused by the trade war between the US and China, with direct costs, market turmoil, reduced investment and lower productivity due to supply chain disruptions all consequences of the tensions.
The IMF also warned the outlook could darken still further should the trade conflict continue to go unresolved. Indeed, by 2020, the tariffs already announced could lower global economic output by 0.8 per cent, which is the equivalent of an economy the size of Switzerland's disappearing.
After 2020, the report suggested global growth may recover slightly to 3.4 per cent, which was attributed to improvements to the economies of Brazil, Mexico, Russia, Saudi Arabia, and Turkey.
However, even this figure was lower than the July forecast and could still change should risks including worsening trade tensions affect them.
Meanwhile, the IMF's research showed global trade growth had reached only one per cent during the first half of this year, which was the weakest figure recorded since 2012. Again, this was blamed on trade tensions, but also the continued uncertainty surrounding Brexit and a decline in the automobile industry.
It has now been predicted that global trade volume will have increased by 1.1 per cent by the end of this year, 2.3 per cent less than April's forecast expected.
Chief economist of the IMF Gita Gopinath said: "To rejuvenate growth policymakers must undo the trade barriers put in place with durable agreements, rein in geopolitical tensions and reduce domestic policy uncertainty."
The news comes shortly after the World Trade Organisation also downgraded its forecast for trade volumes to 1.2 per cent for 2019, far lower than the 2.6 per cent it had originally forecast in April.