A no-deal Brexit and a slump in China pose the biggest economic threats warns IMF

A no-deal Brexit and a sharper slowdown in China are the biggest risks to growth in the global economy in 2019, the International Monetary Fund has warned in its latest economic outlook. In a report published on the first day of the World Economic Forum summit in Davos, Switzerland, the IMF said that alongside already falling levels of growth in Europe, China and Japan, an escalation of the trade war between Donald Trump and Beijing over the coming months and the UK leaving the EU without a deal would lead to further downgrades in its forecasts for growth.

The IMF said global growth would weaken from 3.7% in 2018 to 3.5% this year, down 0.2 percentage points from its prediction last October. Christine Lagarde, the IMF’s managing director, said: “If the world economy were a cross-country skier, she would have been moving at a relatively high speed last year, but now the slope is changing and pointing slightly uphill. This is still a good trail to be on, but it gets a little bit harder to keep up the pace.

“Even as the world economy continues to move ahead, it is facing significantly higher risks, some of them related to policy. These risks are now increasingly intertwined: think of how higher tariffs and rising uncertainty over future trade policy fed into lower asset prices and higher market volatility. This in turn contributed to tightening financial conditions, including for advanced economies, which is a major risk factor in a world of high debt burdens.”

Legarde added: “Does that mean that a global recession is around the corner? The answer is ‘no’, but the risk of a sharper decline in global growth has certainly increased. Add to this geopolitical worries and disappointing long-term growth prospects, and you have an economic picture with a clear message: address remaining vulnerabilities and be ready if a serious slowdown were to materialise.”

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