Davos WEF
Davos WEF

US-China deal offers a 'pathway to peace,' IMF chief says

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Key Points
  • Washington and Beijing last week inked the partial deal which had been more than 18 months in the making, with the world's two largest economies having levied billions of dollars of tariffs on one another's imports.
  • The IMF this week revised down its forecast for global economic growth in 2020 to 3.3% from the 3.4% projected in October 2019, but Georgieva said trade and industrial output were "bottoming out."

The signing of a "phase one" trade deal between the U.S. and China offers a "pathway to peace" which improves the outlook for the global economy, according to International Monetary Fund (IMF) Managing Director Kristalina Georgieva.

The IMF this week revised down its forecast for global economic growth in 2020 to 3.3% from the 3.4% projected in October 2019.

However, Georgieva told a CNBC panel at the World Economic Forum in Davos, Switzerland, that the trade truce had "reduced by 0.3% what would have been the cost on the world economy."

Washington and Beijing last week inked the partial deal which had been more than 18 months in the making, with the world's two largest economies having levied billions of dollars of tariffs on one another's imports over the course of a bruising trade war.

VIDEO4:2104:21
IMF chief sees a 'pathway to peace' after US-China trade deal

A further cause for optimism is the globally synchronized pursuit of more accommodative monetary policy, Georgieva suggested, with 49 central banks around the world cutting rates a total of 71 times over the course of 2019, resulting in a half percentage point boost to global growth for 2019 and 2020.

"Last year, we ended up with 2.9% growth. It would have been less than 2.5% which, by the judgment of the IMF, means recession, so we have avoided that," Georgieva told the panel moderated by CNBC's Geoff Cutmore.

"Of course, central banks, many are running out of space — not the U.S. — but many others are in a tougher place, and that has helped," she added.

Georgieva concluded that despite the downgraded forecast for this year, the global economy is seeing a "bottoming out in trade and industrial output."

"We have reduced our forecast from 3.4% to 3.3% but it is only because of India, the main reason for the downgrade, and because of unrest in a couple of countries. The rest of the world looks better today than it did in October," she said.

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