Top IMF economist predicts ‘sharper’ US slowdown in 2020

Washington, December 10

Americans will begin feeling the effects next year of a marked slowing in world economic growth but should be spared a new recession, the chief economist of the International Monetary Fund said in remarks published on Sunday.

“We have long been predicting somewhat lower (US) growth for 2019 than what we are seeing this year,” as the effects of the Trump administration’s fiscal and budgetary measures begin to fade, IMF chief economist Maurice Obstfeld said.

He was speaking in an interview with the Wall Street Journal and the Financial Times, just days before he is to retire from the world body.

The slowdown “is going to be sharper probably in 2020 than in 2019, according to the data we are seeing,” Obstfeld said.

The IMF has already revised downward its 2019 growth prediction for the US, to 2.5 per cent from the 2.8 per cent expected for this year.

“For the rest of the world there seems to be some air coming out of the balloon,” he said, pointing to weaker than expected third-quarter economic results in Asia and Europe. “That will come back and also affect the US.”          

As he has for months, Obstfeld again deplored the trade frictions—notably between the United States and China, but also between the US and other trading partners, including Europe—that threaten global growth.

But he ruled out the possibility that the world might see another Great Depression, as it did in the 1930s, when “trade absolutely collapsed under the pressure of trade restrictions.” “I see the tensions now as being possibly damaging because so much of global investment and production is tied up in trade,’ he said, “but not liable to the kind of collapse we saw in the 1930s.”

Obstfeld will be succeeded at the IMF by Harvard professor Gita Gopinath. In a separate interview with CBS, IMF managing director Christine Lagarde again deplored the trade tensions that have brought steadily increasing tariffs.

Asked about the recent anti-government protests in France, she said there was “no doubt” they would have an economic impact.

“Those are very sad images,” she said of the globally televised pictures of vandalism and violence on the streets of the French capital. “I’m a true Parisian, and to see what’s happening in Paris is extremely sad.” — AFP