The economic slowdown threatens 90% of the world and Trump trade war costs $700bn.
The US President Donald Trump's trade war will cost global growth of about $700bn by 2020, the size of the Swiss economy, the new managing director of the International Monetary Fund (IMF), Kristalina Georgieva said on Tuesday.
Georgieva expressed regret over the "simultaneous slowdown" in therate of economic growth in the world, pointing out that the IMF willissue, on October 15, the current revised projections for growth for both 2019and 2020. "We expect 2019 growth to slow in about 90% of the world," Georgieva saidin a speech ahead of the fall meetings of the IMF and World Bank in Washington.
"Growth will fall this year to the lowest level since the beginningof this decade," said Georgieva, who took office a week ago.
For more than a year and a half, the US president has been waging atrade war against China to put an end to trade practices he considers "unfair"."Global trade growth is almost at a standstill," said Georgieva, the IMF's managingdirector, arguing that multiple trade tensions are no longer a risk but are "havingan impact," noting that global GDP could fall by about 0.8% by 2020, from 0.5%in July, which is the size of Switzerland's economy".
Besides trade, Britain's exit from the EU without agreement andcorporate debt pose other serious threats to the global economy. In somecountries, companies have benefited from lower interest rates to borrow tofinance mergers and acquisitions rather than investment, according to the IMF.
Georgieva said that in the event of a significant slowdown, thedebt of companies at risk of default will rise to $19tn, or about 40% of thetotal debt in eight major economies; Germany, China, Spain, the United States,France, Italy, Japan and the United Kingdom, noting that this figure is higherthan the levels recorded during the 2008 financial crisis.
Georgieva also called on Germany to increase its spending to reviveits economy, saying that Germany should allocate additional expenditures inparticular for infrastructure and research. Given the signs of a slowing globaleconomy, it was time for countries with fiscal capacity, such as Germany, theNetherlands, and South Korea, to pave the way, noting that low interest ratesstill allowed some governments more room to act.
It is noteworthy that the Bulgarian, Georgieva headed the fundsince October 1, succeeding French Christine Lagarde. Prior to the IMF, Georgievaheld several key positions, most notably as CEO of the World Bank. She was alsothe EU Commissioner for Budget.
The World Bank President, David Malpas said on Monday that theoutlook for global economic growth was deteriorating amid uncertainty overBritain's exit from the European Union, trade tensions and economic downturn inEurope.
"Global economic growth is slowing," Malpas said in a speech inMontreal ahead of the annual meetings of the IMF and the World Bank, addingthat the global economy now appears weaker than the bank's forecast in June of2.6% in 2019.
Malpas said the global economy has been hit by "Brexit, Europe'seconomic downturn and trade uncertainty".
