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  • Tria, from IMF excessive dramatization of Italy. And reassures: "No corrective maneuver"

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23 July 2019Global growth remains "modest". The judgment is of the International Monetary Fund which has reduced its estimates of world GDP for this year and next by 0.1%. The most recent data contained in the update of the World economic outlook, published twice a year, set the increase in the product at 3.2% in 2019 and at 3.5% in 2020, 0.1% less than as indicated in the April report. On the scenario, the Washington institute's economists write, the fears related to the trade war, to the Brexit and to the growing geopolitical tensions that have pushed up the prices of the energy weigh the weight. The risks to the forecast, the Fund warns, "are mainly downward" and "have increased compared to April". And the expected rebound for 2020 is also "uncertain". The fear is that "the escalation of trade and technology tensions will undermine confidence and slow down investments" and that "deflationary pressures burden debt service" and "reduce the scope for monetary policy".

Advanced economies keep
In detail, growth in advanced economies is now expected at 1.9% in 2019 and 1.7% in 2020, with a 0.1% improvement on the estimate for this year. Particularly positive is the revision for the United States, which this year could see GDP rise by 2.6%, 0.3% more than the numbers contained in the spring report. Growth in the euro area should instead stand at 1.3% in 2019 and 1.6% in 2020. The estimates of GDP growth for this year have been revised downwards by 0.1% to 0.7% for Germany, while they remain unchanged at 0.1% for Italy and 1.3% for France. Among the other developed economies, Great Britain collects an upward revision of 0.1% to 1.3%, while Japan undergoes a filing of 0.1% to 0.9%.

Downturn for developing countries
The cut for developing countries is clear. Overall, they will grow by 4.1% this year and by 4.7% next, respectively 0.3% and 0.1% less than the April estimates. For China, the revision is down by 0.1% to + 6.2% for both years. The cut for India is heavier: -0.3% to 7% in 2019 and 7.2% in 2020. Considerable downward revision of the calculations relating to Latin America: here the GDP will grow by 0.6 % in 2019 (0.8% less than the April estimates) and 2.3% in 2020 (and no more than 2.4%). The deterioration is due to Brazil (where "the mood has worsened considerably due to the persisting uncertainty over the approval of pension reforms and other structural reforms") and to Mexico (where "investments remain weak and private consumption slowed down "). In the case of Brazil, the 2019 GDP was reduced by 1.3% to + 0.8% and that of 2020 was reduced by 0.1% to + 2.4%. In Mexico, the economy is expected to grow by 0.9% this year (0.7% less) and by 1.9% next (as expected in April). Argentina's fund limits itself to saying that "the economy contracted in the first quarter even if at a slower pace than 2018" and that estimates for 2019 have been revised "slightly downwards".

Italy does not give certainties
The Italian economy will grow by 0.1% this year and by 0.8% next. The estimate is contained in the update of the World Economic outlook of the International Monetary Fund. In our country, economists at the Washington Institute write, "the uncertainty of the prospects for the accounts remains similar to that of April, with a cost in terms of investments and domestic demand".

The economy suffers from tensions
Downside risks, ie a slowdown in the global economy, have increased compared to last April. Among the risks cited by the Washington institute are "commercial and technological tensions, the possibility of a prolonged risk aversion that exposes the financial vulnerabilities accumulated over the years thanks to low interest rates, geopolitical tensions and an increase in disinflationary pressures ". The Fund points out that although trade tensions have fallen also thanks to the truce signed last June 29 by the US and China, "lasting agreements remain subject to long and difficult negotiations". The IMF cites adverse developments - including additional duties between the US and China, customs tariffs on cars or a failure to reach an agreement on Brexit - which would "weigh on confidence, weaken investments and send supply chains to a standstill, leading to a strong slowdown of global growth compared to the base scenario ", which for the Fund is + 3.2% in 2019 and + 3.5% in 2020.

Attention to deflation
As for the risk of deflation, the Washington institute warns: "it has been rekindled by a slowdown in the global economy and a drop in core inflation in advanced and emerging economies." Lower inflation and lower inflation expectations the difficulties of those in debt increase, they weigh on company investments and limit the room for maneuver of the monenetary policy that central banks have to counter a crisis ". Among other risks, the IMF cites climate change, political change and wars .