New IMF Head Blames Trade Conflicts for ‘Synchronized Global Slowdown’
WASHINGTON — Kristalina Georgieva, the new head of the International Monetary Fund, said Tuesday that the world economy is in the grips of a “synchronized global slowdown” fueled by ongoing trade disputes.
Speaking at the World Bank/IMF annual meetings being held in Washington, D.C. this week, Georgieva, a Bulgarian economist selected last month to succeed Christine Lagarde, warned that if left unresolved, these disputes will result in slower growth for 90% of the world this year.
“We have spoken in the past about the dangers of trade disputes,” Georgieva said. “Now, we see that they are actually taking a toll.”
Georgieva said escalating trade wars, like the one currently going on between the United States and China, could result in a loss of about $700 billion in output by the end of next year — 0.8% of world GDP.
“In this scenario, the whole economy of Switzerland disappears,” she said.
Georgieva announced the IMF will be downgrading its projections for global growth in 2019 and 2020 next week, when it releases new projections of the economic losses related to the trade war between the United States and China.
“Global trade growth has come to a near standstill,” she said. “In part because of the trade tensions, worldwide manufacturing activity and investment have weakened substantially.”
Even if growth picks up in 2020, the current rifts could lead to changes that last a generation — broken supply chains, siloed trade sectors, a ‘digital Berlin Wall’ that forces countries to choose between technology systems,” she added.
Perhaps striving to end on an upbeat note after painting such a dire picture, Georgieva said the only meaningful solution to trade conflicts will occur if countries agree to cooperate with one another.
“The key is to improve the system, not abandon it,” she said, adding, “Everyone loses in a trade war.”
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