The International Monetary Fund (IMF) is one of the leaders in tracking the global economy. Its leader, Christine Lagarde, Managing Director, recently said her concerns about the global expansion have grown. The world’s economic improvement, nearly a decade in the making, may have peaked.
In a recent address she said:
Indeed, there are signs that global growth has plateaued. It is becoming less synchronized, with fewer countries participating in the expansion.
In July, we projected 3.9 percent global growth for 2018 and 2019. The outlook has since become less bright, as you will see from our updated forecast next week.
A key issue is that rhetoric is morphing into a new reality of actual trade barriers. This is hurting not only trade itself, but also investment and manufacturing as uncertainty continues to rise.
The theme among economist that trade wars may kill expansion grows by the day. While an update of NAFTA may prevent such a war among the three nations in North America, tariffs on goods and services worth $250 billion traded between the United States and China already have started to bite.
Moreover, after a decade of relatively easy financial conditions, debt levels have reached new highs in advanced, emerging, and low-income countries.
In fact, global debt—both public and private—has reached an all-time high of $182 trillion—almost 60 percent higher than in 2007.
This buildup has left governments and companies more vulnerable to a tightening of financial conditions.
Emerging and developing economies are already feeling the pinch as they adjust to monetary normalization in the advanced world.
That process could become even more challenging if it were to accelerate suddenly. It could lead to market corrections, sharp exchange rate movements, and further weakening of capital flows.
A recent analysis shows that annual interest payments on U.S. debt will soon swell to equal the entire amount of the American defense budget.
The message was mostly a negative one, which more and more made by experts on the topic are.