Fix your roofs as sun still shining: Christine Lagarde on global economic prospects

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Davos | Published: January 24, 2019 6:40:20 PM

IMF chief Christine Lagarde said the US-China trade war was the biggest risk to the global economy, while Brexit uncertainty was the second biggest risk.

Christine Lagarde, global economy, IMF chief, US, china, IMF growth forecast“Sun is still shining, so please fix the roofs. This is the message we are giving with our modest downward revision to global economic growth,” Lagarde said here at a session of the World Economic Forum. (Reuters)

In a strong message to the world economies, IMF chief Christine Lagarde said on Thursday they should fix the roofs when sun was still shining. Explaining the recent lowering of IMF growth forecast for the global economy, she said the forecast for two major economies have not been revised as yet. “Sun is still shining, so please fix the roofs. This is the message we are giving with our modest downward revision to global economic growth,” Lagarde said here at a session of the World Economic Forum.

“We have not revised our forecast for US and China as they have take certain steps that would keep them growing,” the IMF Managing Director said. While noting that there are some major risks that could precipitate, Lagarde said if Chinese economy slows down a bit, that would be fine but if they fall faster then that could be a problem.

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On Monday, the International Monetary Fund (IMF) cut its global growth projections for 2019 and 2020 to 3.5 per cent and 3.6 per cent respectively, citing slowdown in several advanced economies around the world more rapidly than previously anticipated.

The revised global growth rates are 0.2 and 0.1 percentage point below its previous projections made three months ago. Lagarde said the US-China trade war was the biggest risk to the global economy, while Brexit uncertainty was the second biggest risk.

The trade tension with the US is the major risk we are seeing that could precipitate a slowdown of the Chinese economy, she said. That it is slowing down is fine if it is under control. But if the slowdown was excessively fast, that would be a real issue. For the US, the growth forecast has been left unchanged.

The American economy is expected to decline to 2.5 per cent in 2019 and soften further to 1.8 per cent in 2020 with the unwinding of fiscal stimulus and as the federal funds rate temporarily overshoots the neutral rate of interest, as per the IMF. Similarly, the IMF has projected a growth rate of 6.2 per cent for Chinese economy in 2019 as well as 2020. The forecast is unchanged from that made in October 2018.

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