Page 10 - Malaysia Marine & Offshore Industries Directory 2019/2020
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  The Global economy ouTlook
 According to the International Monetary Fund (IMF), while global growth in 2018 remained close to post crisis highs, the global expansion is weakening and at a rate that is somewhat faster than expected. Its January 2019 update of the World Economic Outlook (WEO) projects global growth at 3.5% in 2019 and 3.6% in 2020, 0.2 and 0.1 percentage point below last October’s projections. While the downward revisions are modest; IMF believes the risks to more significant downward corrections are rising. While financial markets in advanced economies appeared to be decoupled from trade tensions for much of 2018, the two have become intertwined more recently, tightening financial conditions and escalating the risks to global growth.
In its latest WEO update, IMF revised downwards its forecasts for advanced economies slightly. Across advanced economies, growth is expected to slow from 2.3% in 2018 to 2% in 2019 and 1.7% in 2020. This estimated growth rate for 2018 and the projection for 2019 are 0.1 percentage point lower than its October 2018 forecast, mostly due to downward revisions for the euro area.
• Growth in the euro area is set to moderate from 1.8% in 2018 to 1.6% in 2019 (0.3 percentage point lower than last projected) and 1.7% in 2020. Growth rates have been marked down for many economies, notably Germany (due to soft private consumption, weak industrial production following the introduction of revised auto emission standards and subdued foreign demand); Italy (due to weak domestic demand and higher borrowing costs as sovereign yields remain elevated) and France (due to the negative impact of street protests and industrial action).
• There is substantial uncertainty around the baseline projection of about 1.5% growth in the United Kingdom (UK) in 2019-20. The unchanged projection relative to the October 2018 WEO reflects the offsetting negative effect of prolonged uncertainty about the Brexit outcome and the positive impact from fiscal stimulus announced in the 2019 budget. This baseline projection assumes that a Brexit deal is reached in 2019 and that the UK transitions gradually to the new regime.
• The growth forecast for the United States (US) also remains unchanged. Growth is expected to decline to 2.5% in 2019 and soften further to 1.8% in 2020 with the unwinding of fiscal stimulus and as the federal funds rate temporarily overshoots the neutral rate of interest. Nevertheless, the projected pace of expansion is above the US economy’s estimated potential growth rate in both years. Strong domestic demand growth will support rising imports and contribute to a widening of the US current account deficit.
• Japan’s economy is set to grow by 1.1% in 2019 (0.2 percentage point higher than in the October 2018 WEO). This revision mainly reflects additional fiscal support to the economy this year, including measures to mitigate the effects of the planned consumption tax rate increase in October 2019. Growth is projected to moderate to 0.5% in 2020 following the implementation of the mitigating measures.
Economic activity in emerging and developing economies is also projected to tick down to 4.5% in 2019 (from 4.6% in 2018), with a rebound to 4.9% in 2020.
• Growth in emerging and developing Asia will dip from 6.5% in 2018 to 6.3% in 2019 and 6.4% in 2020. Despite fiscal stimulus that offsets some of the impact of higher US tariffs, China’s economy will slow due to the combined influence of needed financial regulatory tightening and trade tensions with the US. India’s economy is poised to pick up in 2019, benefiting from lower oil prices and a slower pace of monetary tightening than previously expected, as inflation pressures ease.
• Growth in emerging and developing Europe in 2019 is expected to weaken more than previously anticipated, to 0.7% (from 3.8% in 2018) despite generally buoyant growth in Central and Eastern Europe, before recovering to 2.4% in 2020. The revisions (1.3 percentage point in 2019 and 0.4 percentage point in 2020) are due to a large projected contraction in 2019 and a slower recovery in 2020 in Turkey, amid policy tightening and adjustment to more restrictive external financing conditions.

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