The signing of a Phase 1 trade agreement between the United States and China will reduce - but not eliminate - uncertainty that has dampened global economic growth, International Monetary Fund Managing Director Kristalina Georgieva said on Friday.
At an event at the Peterson Institute for International Economics, Georgieva declined to give an adjusted global economic forecast, saying that would be released on Monday at the World Economic Forum in Davos, Switzerland.
But she said the IMF expected the trade deal would ensure that China’s gross domestic product expands by 6% in 2020, and she had shared that forecast with Chinese Vice Premier Liu He during a meeting this week.
“It brings China in the parameters of around 6% growth for 2020, rather than below,” she said.
Georgieva said the IMF had previously estimated that global trade tensions would shave 0.8%, or $700 billion, off international economic growth. Only about one-third of that was due to tariffs, with the larger share resulting from a slowdown in business investment. Since the U.S.-China trade deal was only an interim solution, the impact on investment would not be eradicated, she said.
“What we are seeing now is we have some reduction of this uncertainty, but it is not eliminated,” she said.
Georgieva also said the IMF generally favored multilateral agreements, and warned that bilateral agreements could have negative implications for world economic growth in the longer term.