'Synchronised slowdown': New IMF chief sees global growth threats

Washington which as the largest shareholder in the global lender wields an effective right of veto has previously expressed opposition to increasing the IMF's overall funding and shareholder quotas- a move that would also reshuffle voting rights [File

The largest emerging market economies like India are experiencing an even "more pronounced" effect of the global downturn, new International Monetary Fund chief Kristalina Georgieva has said, warning that the global economy is witnessing "synchronized slowdown" which will result in slower growth for 90 per cent of the world this year.

Georgieva's comments come a week ahead of the planned release of the global lender's updated World Economic Outlook, set for October 15.

The IMF expects slower growth in almost 90% of the world this year.

"Two years ago, the global economy was in a synchronized upswing".

"This widespread deceleration means that growth this year will fall to its lowest rate since the beginning of the decade", she added.

In what could be seen as a jab at China and other protectionist states, she warned against subsidies, lax enforcement of intellectual property rights and technology transfers.

Within the middle of her speech, the Bulgarian economist, who succeeded Christine Lagarde, acknowledged that the trade tensions had "critically weakened" manufacturing and investment exercise worldwide.

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The new International Monetary Fund head said that trade disputes have now affecting multiple countries, as are other critical situations like Brexit.

The situation is a stark contrast from two years ago, before the US-China trade war got started, when countries representing almost 75% of the world's output were seeing accelerating growth, she said.

In a new report, the World Bank said global value chains - which spread production processes of goods over multiple countries - grew swiftly from 1990 to 2007 as reduced trade barriers and improved information technology and transportation links induced manufacturers, making up half of all trade.

He has blamed any U.S. slowdown on mistakes made by the U.S. Federal Reserve in raising interest rates too high last year and being too slow to cut rates this year.

In her diagnosis, Georgieva argued that economic exercise is softening in developed economies, such because the US, Japan and, particularly, the eurozone, whereas in a kind of emerging markets, comparable to India and Brazil, the slowdown is even more pronounced this year. Much of the slowdown would come from negative market reactions and waning business confidence, she added.

"We need to work together, now, and find a lasting solution on trade", Georgieva added.

"Our new analysis shows that if a major downturn occurs, corporate debt at risk of default would rise to US$19 trillion, or almost 40% of the total debt in eight major economies", she said. While some governments are burdened by high debt levels, "in places such as Germany, the Netherlands, and South Korea, an increase in spending - especially in infrastructure and R&D - will help boost demand and growth potential", Georgieva said.

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