IMF 2019-2020 Outlook: Recession or Synchronized Slowdown?

The International Monetary Fund (IMF) has released an update to its latest World Economic Outlook with lower growth expected in 2019. What is interesting about the global outlook, despite all the current economic and geopolitical uncertainties and despite the outlook ahead being a downtick from the prior estimate, is that the IMF is actually still looking for global growth to be better in 2020 than in 2019.

With all the reports in the media calling for imminent recession, economists, employers, business owners and investors all have to decipher the data and forecasts and make their own determination about whether a recession is really coming. If it is just a slowdown to very stagnant growth, will it feel like a normal recession like before the Great Recession of 2008 and 2009?

According to the October 15 update, the IMF’s global GDP growth forecast for 2019 is now 3.0%. This represents a 0.3 percentage point drop from its April 2019 outlook and happens to be the lowest level since the 2008 to 2009 period.

As for 2020, the IMF now projects global growth to tick back up to 3.4%. While that is higher than 2019, it still represents a 0.2 percentage point drop from its April 2019 outlook.

The 2020 outlook is based on projected economic improvements in a number of emerging markets (Latin America, the Middle East and emerging and developing Europe) that have been under macroeconomic strain. The IMF’s projected slowdown in China and the United States, as well as many downside risks, do come with a warning that a “much more subdued pace of global activity could well materialize.”

Over the past year, global growth has fallen sharply and advanced economies such as Europe, the United States and smaller Asian economies have all seen broad-based slowing. The slowdown has been even more pronounced in emerging markets and developing economies like Brazil, China, India, Mexico and Russia. The IMF revised outlook did note how the downward trajectory could be avoided:

To forestall such an outcome, policies should decisively aim at defusing trade tensions, reinvigorating multilateral cooperation, and providing timely support to economic activity where needed. To strengthen resilience, policymakers should address financial vulnerabilities that pose risks to growth in the medium term. Making growth more inclusive, which is essential for securing better economic prospects for all, should remain an overarching goal.

The IMF also defined some of the escalating concerns that pose downside risks to the global growth forecast. These are noted, and not in any specific groupings or order, as follows: heightened trade tensions, geopolitical tensions, Brexit-related risks, low inflation and so on.

While 2020’s 3.4% outlook is a downtick for the global growth, it’s only 0.2 percentage points under the 3.6% from 2018. That said, here is the new round of forecasts by nation and region:

  • United States: 2.9% in 2018, 2.4% in 2019 and 2.1% in 2020
  • Canada: 1.9% in 2018, 1.5% in 2019 and 1.4% in 2020
  • Euro Area: 1.9% in 2018, 1.2% in 2019 and 1.4% in 2020
  • Germany: 1.5% in 2018, 0.5% in 2019 and 1.2% in 2020
  • United Kingdom: 1.4% in 2018, 1.2% in 2019 and 1.4% in 2020
  • France: 1.7 in 2018, 1.2% in 2019 and 1.3% in 2020
  • Italy: 0.9% in 2018, 0.0% in 2019 and 0.5% in 2020
  • Japan: 0.8% in 2018, 0.9% in 2019 and 0.5% in 2020
  • China: 6.6% in 2018, 6.1% in 2019 and 5.8% in 2020
  • India: 6.8% in 2018, 6.1% in 2019 and 7.0% in 2020
  • Russia: 2.3% in 2018, 1.1% in 2019 and 1.9% in 2020
  • Brazil: 1.1% in 2018, 0.9% in 2019 and 2.0% in 2020

While it’s easy to sound as though this entirely refutes the recession risks, it’s far from easy. Frankly, some of these projections feel quite optimistic if the status quo remains in place or continues to soften. Many economic numbers are already hitting under the line of growth versus contraction. There are also currently more risks to the downside than there are to the upside.