IMF Managing Director Kristalina Georgieva (Bulgarian economist, a former European Union official who previously held the No. 2 job at the World Bank Group), stated that the trade growth had ‘come to a near standstill’ and the global economy is experiencing a ‘synchronized slowdown’.
The new chief of the International Monetary Fund, Kristalina Georgieva said on October 8, that the global economy is experiencing a ‘synchronized slowdown’, warning that it would worsen if governments failed to resolve trade conflicts and support growth.
In an inaugural speech since taking the helm of the global crisis lender on October 1, IMF Chief Georgieva said trade tensions had ‘substantially weakened’ manufacturing and investment activity worldwide.
“There is a serious risk that services and consumption could soon be affected,” she said.
The cumulative effect of trade conflicts could mean a $700 billion reduction in global gross domestic product (GDP) output by 2020, or around 0.8%, she said.
Georgieva: In this scenario, the whole economy of Switzerland disappears
The research takes into account U.S. President Donald Trump’s announced and planned tariff increases on remaining Chinese imports, or around $300 billion worth of goods, she said.
She also stated that, much of the GDP losses will come from a decline of business confidence, productivity losses from broken supply chains and negative market reactions.
Georgieva said that, In 2019, we expect slower growth in nearly 90 percent of the world. The global economy is now in a synchronized slowdown. This means that growth this year will fall to its lowest rate since the beginning of the decade.
The situation is a stark contrast from two years ago, before the US-China trade war got started, when countries representing nearly 75% of the world’s output were seeing accelerating growth, IMF Chief Georgieva added.
The Bulgarian economist, a former European Union official who previously held the No. 2 job at the World Bank Group, said trade growth had “come to a near standstill.”
Broken supply chains, isolated trade sectors
IMF Chief warned that fractures in trade could lead to changes that last a generation, including “broken supply chains, siloed trade sectors, a ‘digital Berlin Wall’ that forces countries to choose between technology systems.’”
The precarious outlook will affect many countries caught in the crossfire of trade conflicts, including struggling emerging markets with IMF programs, she added.
Moreover, In calling for countries to work together to revise global trade rules to make them sustainable, she referenced frequent complaints about China’s trade practices, without specifically naming the country.
That means dealing with subsidies, as well as intellectual property rights and technology transfers, adding that a modernized trading system would unlock the potential of services and e-commerce.