By Greg Robb, MarketWatch
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The International Monetary Fund is growing even more pessimistic about the global economy, as higher import tariffs are strangling manufacturing activity and international trade.
Global economic growth is expected to fall to 3% rate this year, the slowest pace since the 2008 financial crisis and down from a 3.8% pace seen in 2017.
If global growth slows below a 2.5% rate, that would mean a recession.
“At 3% growth, there is no room for policy mistakes and an urgent need for policymakers to cooperatively de-escalate trade and geopolitical tensions,” said Gita Gopinath, the IMF’s chief economist, at a press briefing
The IMF’s latest World Economic Outlook shaved global growth this year by 0.2 percentage points and 0.1 percentage point next year, compared with the organization’s view from July.
The IMF’s pessimism didn’t deter a rally in risk assets, with the Dow industrials /zigman2/quotes/210598065/realtime DJIA +0.33% surging on Tuesday.
Growth was projected to be slower in 2019 in almost every major country except Brazil.
World trade volume growth in the first half of 2019 was 1%, the weakest level since 2012.
If all possible U.S. and China’s trade tariffs are put in place, it will reduce global growth by 0.8% by 2020, the IMF said.
The pessimism was stark for China with output forecast down by 0.3 percentage points this year and 0.2 percentage points next year to a 5.8% growth rate.
China has been hit by higher U.S. import tariffs but also slowing domestic demand following needed measures to rein in debt, the IMF said.
The misery is spreading through Asia, with downward revisions for growth for Hong Kong, South Korea, and Singapore.
Projected growth in Saudi Arabia was cut by 1.7 percentage points this year and output growth in India was cut by 0.9 percentage points.
For 2020, global growth is projected to improve modestly to 3.4% rate, but this optimism looks “precarious,” Gopinath said.