The world economy is slowing down

THE GLOBAL economy has enjoyed a long expansion since the worst days of the financial and economic crisis in 2009. Many worry about another big downturn. But few can claim to predict if or when that might happen. Today the IMF published a downbeat assessment in its six-monthly forecasts, revising down its prediction for the growth in world output.

The IMF has lowered its forecast for global growth to 3.3% in 2019, down from the 3.7% it had predicted in October (and down from the 3.6% it recorded in 2018). This would be the weakest annual growth rate since 2009, when global output was shrinking at an annualised rate of 3%.

Whereas the IMF issues yearly figures for global growth, The Economist has calculated a series of quarterly figures, based on data from 73 countries, weighted by their share of world GDP. In total these countries account for 95% of global output. These suggest that the slowdown started in the second half of 2018. In the fourth quarter of 2018, output over the previous 12 months had grown by 2.8%, about half a percentage point less than in the same period a year earlier. This is the steepest slowdown for two and a half years.

Growth has been slowing in rich countries, most notably in Europe, as well as poor ones. America, China and India stand out for sustaining their level of growth. But for how much longer?

The IMF sees plenty of downside risks. One is an intensification of the trade war between America and China. Market sentiment was not helped by America threatening on April 8th to impose new tariffs on imports from the European Union over a long-running dispute about subsidies for aircraft. Another danger is the prospect of a no-deal Brexit, as Theresa May lobbies EU leaders for another delay to avoid crashing out on April 12th. A third worry is that nervous markets might again drive up the debt-financing costs of highly indebted countries (eg, Italy), and set in motion the “doom-loop” between banks and sovereigns in the euro area.

In the more distant future, the fund worries that climate change and global inequality could weigh on growth over the long term. A decade after the crisis of 2009, the fund is fretting about the health of the world economy.