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Week in Perspective: Global growth outlook cut to lowest since financial crisis

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The International Monetary Fund (IMF) cut its forecast for global growth in 2019 down from 3.5% to 3.3%, the slowest pace since the financial crisis, citing headwinds in many major economies and signs that tariffs were affecting global trade. In its latest World Economic Outlook, published on Tuesday, the Washington-based organisation cut its outlook for the third time in six months and said the growth rate this year would be the weakest since 2009, when global growth turned negative. It predicted that advanced economies would “continue to slow gradually” into 2020 while emerging markets would play a more prominent role in contributing to global growth, due to the end of “crisis” conditions in Turkey and Argentina, and an improved Chinese growth rate. The forecast cuts come on the back of a sharp slowdown in global growth in the second half of 2018, from 3.8% in the first half to 3.2% in the second. IMF economist Gita Gopinath said now is “a delicate moment for the global economy”.

“While a global recession is not in the baseline projections, there are many downside risks,” she said. Among the threats are the outcome of negotiations between the US and China on trade, and a no-deal Brexit. Nevertheless, it said global growth will recover in the second half of 2019 before levelling off at 3.6% from 2020. It cited recent encouraging developments including the decision by the US Federal Reserve to hold back on further interest-rate rises, encouraging data from manufacturers in China and a strong US jobs market.

In the same report, the IMF cut its outlook for UK growth to 1.2% in 2019, down 0.3% from three months ago. However, data released by the Office for National Statistics suggested that UK GDP grew by 0.2% in February compared to the previous month, surprising analysts who had predicted a 0% growth rate in the period. In the three months to February, the rate of economic growth remained the same as in the previous three-month period, at 0.3%. The result is that the annual rate of economic growth now stands at 2%, the highest since November 2017. However, some of the growth was attributed to manufacturers stockpiling goods in case of a no-deal Brexit – a temporary contributor that will fade once the Brexit uncertainty has gone, and that could lead to growth slowing later in the year.

Retail sales fell in March as the ongoing Brexit uncertainty stopped consumers purchasing big-ticket items. The news comes from a survey by the British Retail Consortium and KPMG. It said that total sales dropped by 0.5% year on year, compared to a 0.5% increase in February.

More disappointing news came from the UK property market. According to a survey by the Royal Institution of Chartered Surveyors (RICS), house prices declined “modestly” across the country in March, while new buyer enquiries fell for the eighth month in a row and the number of properties on estate agents’ books remained at a near-record low of 42 per branch. The survey showed that a net balance of 24% of surveyors saw a decrease in prices in March. The weakest sentiment emerged from London and the southeast in terms of prices, and these are the only areas where surveyors predict prices will continue falling over the coming year. At a national level, a balance of 15% more surveyors think house prices will be higher in 12 months’ time rather than lower.

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