IMF Cuts 2019 Global Growth Forecasts Again: "We Have No Idea," Says Lagarde

For the fourth time since October, the IMF revised its global growth forecast lower.

The Wall Street Journal reports IMF Lowers 2019 Global Growth Forecast.

The global economy is starting the year on weaker footing, according to new quarterly forecasts from the International Monetary Fund.

The global economy is starting the year on weaker footing, according to new quarterly forecasts from the International Monetary Fund.

That report was on January 21. For details, see the IMF's World Economic Outlook Update, January 2019.

Today, Lightening Bolts and Clouds

Please consider IMF Warns of Global Economic "Storm" as Growth Undershoots.

Last month, the IMF lowered its global economic growth forecast for this year from 3.7 percent to 3.5 percent.

Lagarde cited what she called "four clouds" as the main factors undermining the global economy and warned that a "storm" might strike.

The risks include "trade tensions and tariff escalations, financial tightening, uncertainty related to (the) Brexit outcome and spillover impact and an accelerated slowdown of the Chinese economy", she said.

Lagarde said trade tensions -- mainly in the shape of a tariff spat between the United States and China, the world's two biggest economies -- are already having a global impact.

"We have no idea how it is going to pan out and what we know is that it is already beginning to have an effect on trade, on confidence and on markets," she said, warning governments to avoid protectionism.

Lagarde also pointed to the risks posed by rising borrowing costs within a context of "heavy debt" racked up by governments, firms and households.

"When there are too many clouds, it takes one lightning (bolt) to start the storm," she said.

"We Have No Idea"

The IMF is perpetually far behind the curve. It never sees the clouds or the lightening bolts in real time.

It's refreshing to hear Lagarde say "we have no idea". The IMF should say that every month.

Mike "Mish" Shedlock

Comments (12)
No. 1-7
Tengen
Tengen

I've known we're in for a rough future since the buildup to the 2008 crisis. After the Fed propped everything up a decade ago without addressing any structural reforms, it's been a matter of time. However, each year online forecasters say this could be the year things get rocky, I've shrugged. I haven't seen any specific catalyst that would spark the end.

Things are starting to feel different, but I still don't think 2019 is the year. The social mood keeps getting worse and financial fundamentals haven't improved at all (yes, global debt is still a ponzi and ridiculously unsustainable) but I think this gradual descent still has legs.

It's the psychological aspect that's toughest. Once you realize this system can't work, human nature kicks in with a desire to get the crash over with so the rebuild can begin. Unfortunately central bankers are here to stave off the inevitable as long as they can, creating ever greater imbalances along the way.

So sit back, prepare as best you can, relax, and grab a hot beverage while the rest of society freaks out over the outrage du jour, along with pretty much everything Trump or AOC says. This dumb show must go on, at least a little longer.

St. Funogas
St. Funogas

Great comments Tengen. The view is great from my little homestead in the Gulch. Let the fireworks begin when they may, but hopefully sooner than later. It's great having commentators such as Mish and yourself, as well as a bunch of the others, providing insightful and entertaining commentary. Reminds me of the good old days with Curt Gowdy and Howard Cosell.

Bam_Man
Bam_Man
Updated on

Debt-based global economies, pulling demand forward to show artificial "growth", for decades. Eventually, the piper must be paid. He is here now, pounding on the door, wielding a baseball bat, demanding his due.

Realist
Realist

I see no reason to expect some kind of economic catastrophe in the near future, barring a black swan event. Instead, I expect continued slow growth for another year or two, perhaps more.

Casual_Observer
Casual_Observer

The Fed was pumping in 100B per month from 2012 til the end of 2017. How big a bubble is this ? Prices and incomes are so disparate now. We have no deflation because assets are linked to investments which are owned by the Fed and must stay high. It is anyone's guess how long this can go on.