The Tel Aviv skyline at night. Photo: Gilad Avidan via Wikimedia Commons.

CTech – Bad news for the global economy and for Israel — the International Monetary Fund cut its global growth forecast for 2019 yet again, from 3.2 percent in July to three percent, IMF announced Tuesday. This is its lowest growth forecast since the 2008 financial crisis. The fund also lowered its growth forecast for Israel to 3.1 percent, after lowering it from 3.5 percent to 3.3 percent in April. The global projection for 2020 was lowered from 3.5 percent to 3.4 percent, while for Israel it was lowered to 3.1 percent. The fund also predicted a three percent growth rate for Israel in 2024.

Last week, the Bank of Israel reiterated its 3.1 percent forecast for 2019 but cut its 2020 forecast to a pessimistic three percent. According to the bank, Israeli inflation will stay at the lower limit of the government’s price stability target (one percent to three percent) in 2019, before rising to 1.3 percent in 2020, though that is still below the mid-range target Bank of Israel governor Amir Yaron has set. While IMF projected a very low inflation rate for Israel for the next two years, it has also estimated that Israel’s low unemployment rate will continue at around four percent.

According to IMF, the US will see 2.4 percent growth in 2019, down from 2.9 percent in 2018, after the effects of President Donald Trump’s tax reform passed two years ago have dissipated. The UK’s projection was cut from 1.4 percent to 1.2 percent due to Brexit uncertainties. Germany will see growth as low as 0.5 percent in 2019, down from 1.5 percent in 2018. China will be down to 6.1 percent from 6.6 percent. The biggest loser is Saudi Arabia, which had its 2019 projection cut from 1.9 percent to 0.2 percent.

IMF cited trade tensions, a projected slowdown in the US and Chinese economies, a global decrease in manufacturing, and growing geopolitical uncertainty as some of the reasons behind the global downturn. The report’s authors state those tensions and risks have yet to be felt in their entirety thanks to a quick response by the central banks, which changed policies accordingly, and also as a result of the continued resilience of the service sector which supports employment growth. The authors cautioned, however, that the outlook “remains precarious.”