IMF Downgrades Global Economic Outlook

The International Monetary Fund has published the October 2019 Report of its World Economic Outlook series which warns of a downturn in economic growth within the global economy. Concerns around rising trade barriers and slowing manufacturing momentum has led to the IMF revising its growth figures down from the previous report in April 2019.

On a world scale, the IMF has cut its forecast growth rate from 3.3% to 3.0% for 2019. In advanced economies such as the United States and the eurozone, growth expectations have been slashed to just 1.7% for 2019, a cut of 0.6% from 2018. Growth rates in emerging market and developing economies are also expected to suffer slower economic growth – they also have had growth rates cut by 0.6% to 3.9% for 2019.

The IMF has cited many reasons for these revised figures, with the worsening trade relations between the United States and the People’s Republic of China being paramount. The imposition of tariffs on consumer and capital goods has exacerbated slowing demand within China, which was already struggling due to efforts to address excess debt. This has also hit consumers in the United States with higher prices for imported goods. Confidence has also taken a hit in Europe due to uncertainty around the future relationship between the United Kingdom and the European Union. Worldwide, low business confidence from manufacturing firms has led to cautious decision making. Geopolitical tensions have held back investment from these firms leading to reduced industrial output.

In a sly dig at world policymakers, the IMF called for “policies [which] decisively aim at defusing trade tensions, reinvigorating multilateral cooperation, and providing timely support to economic activity where needed”.

Gold Price in US Dollars

Surprisingly, gold has weakened against the US dollar since the IMF published the report. Over the week it has fallen by $56.12 to leave it at a price of $1455.78 per troy ounce, which is a decrease of 3.71%. Perhaps it may be misplaced confidence in the markets, or maybe just ignorance about the prospects for the global economy. During uncertain times where future prospects look negative, it pays to be vigilant and cautious, and gold offers that security.

The October 2019 IMF World Economic Outlook report can be found here.