Furious voters are losing trust in governments and will wreck the world order, warns IMF

Monday, January 21, 2019
By Paul Martin

UK growth forecasts for 2019 unchanged at 1.5% but global growth cut to 3.5%
Chinese economy grew by 6.6% last year – its slowest annual rate since 1990
Anger in countries such as the US, France and Britain could make the next global downturn far worse

21 January 2019

A no-deal Brexit and a worse-than-expected slowdown in the Chinese economy could cause more turbulence on the financial markets and hit global growth, the International Monetary Fund has said.

The US organisation issued the warning as it left its growth forecasts for the UK in 2019 unchanged at 1.5 per cent, but slashed global growth forecasts for this year by 0.2 per cent to 3.5 per cent.

It comes as separate figures released today show that in 2018, the Chinese economy grew by 6.6 per cent, its slowest annual rate since 1990.

‘Risks to global growth tilt to the downside. An escalation of trade tensions beyond those already incorporated in the forecast remains a key source of risk to the outlook,’ the IMF said.

And added: ‘A range of triggers beyond escalating trade tensions could spark a further deterioration in risk sentiment with adverse growth implications, especially given the high levels of public and private debt.

‘These potential triggers include a ‘no-deal’ withdrawal of the United Kingdom from the European Union and a greater-than-envisaged slowdown in China.’

Growth forecasts for the global economy were lowered in October due to the tariff war between the US and China.

But the IMF lowered them further today in light of new automobile fuel emissions standards in Germany, concerns about Italy and a steeper contraction in Turkey.

It now expects global growth in 2020 to be 0.1 per cent lower than previously expected at 3.6 per cent.

However, it lifted its forecasts for the UK by 0.1 per cent to 1.6 per cent on the assumption that Britain will reach a Brexit deal this year and that the country will gradually transition a new regime.

At the same time, it warned that ‘the shape that Brexit will ultimately take remains highly uncertain’.

The IMF also warned that voters are losing trust in globalisation and could tear down the international order which supports world trade.

Anger in countries such as the US, France and Britain could make the next global downturn far worse, according to the International Monetary Fund.

It is concerned that global organisations and national governments are no longer seen as being on the side of the people.

This could make it harder to stop the next recession blowing up into a full-blown disaster on the same scale as the financial crisis.

The problems were highlighted in a blog by IMF deputy managing director David Lipton.

He wrote: ‘National governance has in many respects fallen into disrepute – witness the turmoil resulting from recent elections in many countries.’

Lipton said this resentment will make it far harder for taxpayers’ money to be used to shore up banks during the next crisis.

And he warned that if a future recession harms ordinary workers and small businessmen, states will come under pressure to financially support these people as they did for the banks in 2008.

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