Aug 6, 2019

The global outlook has worsened, however, with also upsides for some emerging countries

Quick Update

  • In its latest July World Economy Outlook, IMF further revised down global growth projections on the backdrop of higher tariffs on US-China trade, elevated Brexit uncertainties and increasing geopolitical tensions affecting commodity prices. Currently IMF expects global growth at 3.2% in 2019 and 3.5% in 2020, 0.1 PP lower compared to the previous projections. Risks to the outlook remain tilted to the downside, including further denting of the business and consumer sentiments, increase in the risk aversion and constrained space for the monetary stimulus to counter potential downturn.
  • Growth was revised downwards mostly for emerging countries including China, Latin America, Russia and South Africa. At the same time, the outlook for most of Georgia’s economic partners remained unchanged and/or was revised upwards. The EU is expected to grow at a same rate in 2019 and slightly stronger in 2020. The outlook for the CIS countries other than Russia was kept unchanged while the projections for Emerging and Developing Europe was revised upwards for 2019 and downwards in 2020.
  • In light of the implications of global developments for the economic outlook as well as muted inflation pressures, as expected, the Fed lowered the target range for the policy rate to 2 to 2-1/4 percent, however, with a more hawkish tone, causing the USD to strengthen somewhat. Still, following the escalating tensions between the US and China dollar has retreated and US 10 year yields dipped further, increasing the appetite for at least some emerging markets, historically the relevant for Georgia.
  • The ECB also signaled further monetary stimulus amidst weakening the growth in the Euro Area and higher risks stemming from China slowdown.
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