Christine Lagarde dropped hints in a speech yesterday in Bali that the Washington-based fund would cut its global growth forecast, which will be presented next week at its annual meeting.
Speaking ahead of the meetings, she said: “In July, we projected 3.9% global growth for 2018 and 2019. The outlook has since become less bright, as you will see from our updated forecast next week.”
The IMF will update its World Economic Outlook on 9 October ahead of its annual meeting in Bali.
Lagarde said: “A key issue is that rhetoric is morphing into a new reality of actual trade barriers.
“This is hurting not only trade itself, but also investment and manufacturing as uncertainty continues to rise.”
She suggested that the economic ‘weather’ had started changing after the last annual meeting in Washington at the end of last year, when most of the world was experiencing strong growth.
In June, the IMF boss warned that the economic outlook was bleak, highlighting rising protectionism.
Although levels of unemployment is falling and fewer people are living in extreme poverty, she said some risks to the economy had begun to materialise.
The rising trade tensions, triggered by US president Donald Trump’s tariffs on steel and aluminium, has already lowered the level of imports and exports around the world, Lagarde said.
“If the current trade disputes were to escalate further, they could deliver a shock to a broader range of emerging and developing economies,” she added.
Speaking of the lack of multilateral collaboration, she said that “sailing alone” was not the way to address trade issues.
“When we sail together, we are stronger, nimbler, better able to steer the ship through rough waters and avoid the rocks of shipwreck,” she concluded.