The IMF says global growth has “plateaued,” so it’s all downhill from here

The IMF says global growth has “plateaued,” so it’s all downhill from here
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Earlier this year, the International Monetary Fund (IMF) got a little ahead of itself. The world economy’s “broad-based momentum” led the global lending organization to upgrade its forecasts for global growth over the next few years.

Today, in its latest batch of forecasts, the IMF admitted that it was “over-optimistic,” cutting its projections down to where they were last year, and warning that “the likelihood of further negative shocks to our growth forecast has risen.”

Global GDP will expand by 3.7% this year and next, down from the 3.9% pace projected in April. Looking further out, growth is also expected to settle at a lower rate than previously expected, to the extent that forecasters can say anything definitive about economic conditions in the 2020s.

What happened? A recent global growth spurt, powered by the US, owes a lot to temporary stimulus, like tax cuts, that “seem unsustainable over the long term,” the IMF warned.

With great understatement, the fund also notes that trade tensions—most notably the tit-for-tat tariffs imposed by the US and China—aren’t conducive to growth. ”Trade policy reflects politics, and politics remain unsettled in several countries, posing further risks,” the IMF said. The pain of increased trade frictions is broad-based: in its latest forecasts, the IMF cut its forecast for 2019 growth in 15 of the G20 countries.