IMF, CEOs expect the world economy to slow down

Corporate executives have joined the International Monetary Fund in warning that the global economy is slowing faster than expected, establishing a downbeat tone for this week’s annual meeting of the World Economic Forum.

Hours after the IMF cut its forecasts for the world economy this year and next, PricewaterhouseCoopers LLP (PWC) released a survey showing 30 percent of business leaders expect the expansion to weaken, about six times the number of a year ago.

“The world economy is growing more slowly than expected, and risks are rising,” IMF Managing Director Christine Lagarde told reporters in Davos, Switzerland, the home of the conference of policy makers, investors, and executives that begins Tuesday.

The outlooks were published on the same day China revealed that last quarter showed the slowest expansion since 2009, and come as investors are questioning the sustainability of demand as it’s buffeted by trade battles and other political flash points, such as Brexit and the U.S. government shutdown.

In executing its second downgrade in three months, the IMF predicted global growth of 3.5 percent this year, beneath the 3.7 percent expected in October and the rate in 2018. Among major economies, the deepest revision was for Germany, which the IMF now sees expanding 1.3 percent this year, down 0.6 percentage points from October.

The unease is spreading to the board room, with North American executives especially worried, according to PWC. The number of them declaring themselves optimistic fell to 37 percent from 63 percent last year.

“There’s a significant increase in pessimism toward the economy, spread pretty much around the world,” Bob Moritz, global chairman of PWC, said.

There is still optimism, as 42 percent of those surveyed by PWC see an improved outlook, albeit down from 57 percent last year. The IMF also left its projections for the United States and China unchanged and even anticipates a pickup in worldwide expansion to 3.6 percent next year.

Still, the probability of more pain is rising, especially if the current trade truce between the U.S and China proves short-lived.

“It is important to take stock of the many rising risks,” said Gita Gopinath, the fund’s new chief economist. “Given this backdrop, policymakers need to act now to reverse headwinds to growth and prepare for the next downturn.”