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Gita Gopinath, IMF Chief Economist and Director of the Research Department, speaks at a briefing during the IMF and World Bank Fall Meetings on October 15, 2019 in Washington, DC - The world economy is slowing to its weakest pace since the global…

The world economy is slowing to its weakest pace since the global financial crisis, as the US-China trade war undercuts business confidence and investment, the IMF said Tuesday.

It warned that the outlook is beset by risks, and urged policymakers to work to find resolutions to trade disputes, since there are limited tools to respond to a new crisis.

"With a synchronized slowdown and uncertain recovery, the global outlook remains precarious," International Monetary Fund chief economist Gita Gopinath said in her introduction to the latest forecasts.

The IMF for the past year has every three months cut projected growth for 2019 as trade conflicts worsened.

In its latest World Economic Outlook it trimmed the estimate by another two-tenths, to 3.0 percent. The report also lowered the 2020 forecast by a tenth to 3.4 percent.

"At three percent growth, there is no room for policy mistakes and an urgent need for policymakers to cooperatively deescalate trade and geopolitical tensions," Gopinath said.

In addition, the trade conflicts and a slowdown in auto sales worldwide means trade growth has slowed sharply, falling in the first half of the year to its weakest since 2012, with an estimated increase of just 1.1 percent this year after a 3.6 percent jump in 2018.

Running low on ammo

While the US economy also has been hit by uncertainty, largely created by President Donald Trump's trade offensive, the world's largest economy remains a bright spot on the global stage, the report said.

After upgrading its US outlook in July, the latest WEO reversed course, and cutting the US forecast this year to 2.4 percent — still above trend, but two-tenths below the July forecast.

In 2020, the IMF projects U.S. GDP to expand by 2.1 percent, unchanged from the prior report.

"For the United States, trade related uncertainty has had negative effects on investment, but employment and consumption continue to be robust, buoyed also by policy stimulus," Gopinath said.

Major central banks have taken steps to soften the blow to growth by lowering interest rates, without which the downturn would have been worse, she said.

However, she cautioned that monetary policy "cannot be the only game in town" and governments, notably in countries like Germany, should take advantage of low rates to make investments to support growth.

"With central banks having to spend limited ammunition to offset policy mistakes, they may have little left when the economy is in a tougher spot," Gopinath warned.

The U.S.-China trade war alone is estimated to shrink the world economy by 0.8 percent in 2020, the IMF said.

The fund warned that risks to the outlook predominate, and the uncertainty around trade policy, which causes businesses to hold off on investments and undermines confidence, will take a larger chunk out of growth than the tariffs themselves

Slowing auto sales

"To forestall such an outcome, policies should decisively aim at defusing trade tensions, reinvigorating multilateral cooperation, and providing timely support to economic activity where needed," the report said.

But trade is not the only reason for the global slowdown: the report notes that in China's economy, for example, growth is moderating as intended amid slowing domestic demand.

Other major economies like Brazil, India, Mexico, Russia and South Africa are slowing this year due to "idiosyncratic reasons" but are expected to recover in 2020.

"A notable feature of the sluggish growth in 2019 is the sharp and geographically broad-based slowdown in manufacturing and global trade," the IMF said, which in addition to the higher tariffs and trade uncertainty is the result of the contracting auto industry.

That slowdown has had an impact in Germany, China and India, the report said.

FILE - Zimbabwe's civil servants carry placards as they march during a protest in the streets of the capital Harare.

HARARE (Reuters) - Zimbabwe’s public sector unions said on Tuesday they were unable to go to work because of soaring prices, adding to the government’s problems as it struggles to revive the economy.

The unions however stopped short of calling a strike to give the government more time to respond to their salary demands.

President Emmerson Mnangagwa is grappling with triple-digit inflation, shortages of dollars, fuel and bread, and rolling power cuts that have hit mines and industry.

His government’s moves to end subsidies on fuel and electricity and a decision to re-introduce the Zimbabwe dollar have accelerated inflation and dimmed hopes of economic recovery.

The Apex Council, which groups 14 public sector unions, said it had told the government on Monday that its 230,000 members - which exclude workers from the security and health services - no longer had the capacity to go to work.

Asked if this amounted to a strike, Apex Council co-chair Thomas Muzondo said workers would report for duty only when they were able to do so.

“Here is a situation where one has no capacity to go to work. The person wants to go to work but has no capacity. It is a different scenario to a stay-away,” Muzondo told reporters.

Unions are demanding that government employees should be paid U.S. dollar-indexed salaries. They want the least-paid workers - who get 1,023 Zimbabwe dollars ($67) a month - to receive the equivalent of $475.

In shops, prices of sugar, cooking oil and maize meal are rising at least once a week in line with the weakening local currency, but salaries have fallen behind.

Some public sector doctors have been on strike since Sept. 3 to demand higher pay and have vowed not to return to work even though a court ruled their action was illegal.

The government is caught between placating restive workers and keeping the share of public wages in the national budget low, in line with commitments under an International Monetary Fund programme that ends next year.

The worst economic crisis in a decade, worsened by a drought that cut farm output, has angered citizens. Mnangagwa’s government is anxious to avoid violent protests like those in January after a sharp fuel price hike.

The crisis has echoes of the dark days under late president Robert Mugabe, when hyperinflation reached 500 billion percent and workers stopped reporting for duty as salaries and pensions became worthless. (Reporting by MacDonald Dzirutwe; Editing by Giles Elgood)

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