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There are indications that market sentiment is improving as manufacturing activity and global trade show some early signs of life. The global economic growth forecast has softened slightly, largely due to unexpected downturns in some emerging market economies and rising social unrest.

That’s the takeaway from the January revision of the International Monetary Fund’s World Economic Outlook (WEO) released Tuesday to coincide with the beginning of the World Economic Forum in Davos, Switzerland.

For the year just ended, the WEO has lowered its previous forecast of global growth from 3.0% to 2.9%. For 2020 and 2021, the IMF now expects global growth of 3.3% and 3.4%, respectively, down from the prior estimate by 0.1 percentage point this year and 0.2 points for 2021. Absent recent stimulus in both advanced and emerging market economies, the global growth estimates would have been 0.5 percentage points lower in both years.

Growth in advanced economies is projected to drop from 2.3% in 2018 to 2% in 2019 and 1.7% in 2020, primarily due to downward revisions in the eurozone. Brexit remains a major concern and recent developments have done nothing to rein in uncertainty.

U.S. growth in 2019 is projected to reach 2.3%, declining to 2.0% in 2020 and dropping to 1.7% in 2021. The IMF attributes the lower growth estimates “to a neutral fiscal stance and anticipated waning support from further loosening of financial conditions.” That means that further rate cuts by the Federal Reserve are either unlikely or unlikely to have a significant impact on the country’s economic growth.

In the euro area, growth is forecast to rise from 1.2% in 2019 to 1.3% this year and 1.4% in 2021. The IMF sees “improvements in external demand” supporting “firmer” growth.

For the United Kingdom, 2019 growth is projected a 1.24%, rising to 1.45% in 2020 and 1.54% in 2021, assuming an orderly Brexit.

Economic growth in developing Asian countries is forecast at 5.6% for 2019, rising to 5.8% this year and 5.9% next year. At this point last year, the WEO forecast that Asia’s emerging economies would grow by 6.3% in 2019 and 6.4% in 2020. The IMF cites India’s sharply lower demand growth, stress in the nonbank financial sector and a decline in credit growth along with slower growth in China as the principal concerns.

Key risks to the January outlook include rising geopolitical tensions, particularly between the United States and Iran. Higher trade barriers between China and the United States “have hurt business sentiment and compounded cyclical and structural slowdowns” in “many” countries over the past year. Increasing trade tensions between the United States and its European trading partners “could undermine the nascent bottoming out of global manufacturing and trade, leading global growth to fall short of the baseline.”

A third key risk is weather-related disasters that have “imposed severe humanitarian costs and livelihood loss across multiple regions in recent years.”

The WEO expects crude oil prices to decline from an average of $60.62 per barrel in 2019 to $58.03 in 2020 and $55.31 in 2021. These estimates are based on a simple average of Brent, Dubai Fateh and West Texas Intermediate (WTI) grades as of November 12, 2019. The current price for Brent is $64.23 a barrel, while Dubai is selling at $62.59 and WTI at $57.89, for a simple average of $61.57 a barrel.

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