IMF cuts outlook for global growth to lowest since 2009

The IMF said the global economy is likely to grow 3.3 per cent this year.
The IMF said the global economy is likely to grow 3.3 per cent this year.PHOTO: REUTERS

Analysts say downgrade is unlikely to impact Singapore's already adjusted growth figures

The International Monetary Fund (IMF) has cut its outlook for global growth amid slowing economic activity in the second half of last year and a gloomier outlook in major economies.

In its third downgrade since October, IMF said yesterday that the global economy is likely to grow 3.3 per cent this year, the slowest pace since the financial crisis in 2009.

IMF's forecast cuts 0.2 percentage point from its outlook in January, and although Singapore's growth trajectory will reflect a slowdown, OCBC Bank's head of treasury research and strategy Selena Ling said "deterioration in the global growth environment has been fairly well-telegraphed for the last few months".

Analysts believe the downgrade is unlikely to impact Singapore's growth forecasts.

DBS senior economist Irvin Seah said consensus numbers here have already been adjusted downwards, with the Monetary Authority of Singapore's (MAS) survey last month of professional forecasters finding an expected gross domestic product (GDP) growth of 2.5 per cent for this year, down from 2.6 per cent in December. The economy grew 3.2 per cent last year.

He added that MAS will likely stand pat on its monetary policy stance at a review tomorrow, after two rounds of tightening.

IMF's semi-annual World Economic Outlook yesterday pointed to trade tensions between the United States and China, as well as a potentially disorderly British exit from the European Union as key risks, warning that chances of further cuts to the outlook were high. Major economies such as China and Germany may need to take short-term actions too, IMF said.


IMF chief economist Gita Gopinath said governments may need to synchronise stimulus "across economies" if the slowdown becomes more serious. Its projected growth rate for next year, however, remains at 3.6 per cent if risks do not materialise.

UOB economist Barnabas Gan also identified US-China trade talks as a risk factor for Singapore, on top of a global tech slowdown, saying "Singapore's economy is very much dependent on how the global economy performs".

Maybank Kim Eng economist Chua Hak Bin said the range of outcomes in the second half of the year is wide, although he added there is a low probability of recession.

For now, economists are gearing up for what some call a "disappointing" advance GDP estimate for the first quarter, at below 2 per cent.

Dr Chua said: "Manufacturing growth has stagnated in the first two months and a lot of trade-related services and sectors have been hit."

But Mr Seah said exports and trade figures, as well as global semiconductor sales numbers, show emerging signs of "a bottoming out" in the economic cycle.

Noting that the trade war, which was at its worst in the fourth quarter last year, brought out risk-averse behaviour, he said he expects inventories to be restocked. Taking into account stimulus measures from China, he added that Singapore will likely see improvements in the second half of the year.


A version of this article appeared in the print edition of The Straits Times on April 11, 2019, with the headline 'IMF cuts outlook for global growth to lowest since 2009'. Print Edition | Subscribe