The IMF again downgrades outlook for the global economy

10 October, 2018, 03:41 | Author: Regina Silva
  • The IMF again downgrades outlook for the global economy

Citing the U.S. tariffs on China and Beijing's retaliatory measures, as well as U.S. President Donald Trump's plan to impose global automobile and parts tariffs, International Monetary Fund chief economist Maurice Obstfeld said he regards "further disruption in trade policies" as major near-term downside risks.

The Dow Jones Industrial Average fell 17.59 points, or 0.07 per cent, at the open to 26,469.19.

The IMF warned that China's growth even risked declining by a full percentage point by next year in the event of a "worse-case" scenario, involving further tariffs coupled with a collapse in confidence by businesses and markets. Britain's FTSE 100 dropped 0.4 per cent to 7,201.

The IMF said the global economy would grow 3.7 per cent this year, the same as in 2017 but down from the 3.9 per cent it was forecasting for 2018 in July.

USA growth this year remained steady at 2.9 percent but is set to slow in 2019 as the effect of Trump's sweeping tax cuts wear off and the trade dispute with China begins to set in.

Earlier, the Asian Development Bank (ADB) announced that it will provide $7.1 billion in financing to help Pakistan achieve inclusive and sustainable growth over the next three years.

The benchmark US 10-year Treasury yield climbed to its highest since May 2011 on Tuesday.

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"The downward revisions reflect to an important extent the worsening of growth prospects for Iran, following the re-imposition of United States sanctions", it said.

"In the case of a flexible exchange regime the national currency, the Pak rupee, would further depreciate to around PKR140 against the U.S. dollar from the current PKR127". The Indian and Sri Lankan rupees both hit record lows. Global growth will slow to 3.6 per cent by 2022-2023, as growth in rich nations falls back to potential, it said.

As stakeholders look for a categorical position of Khan's administration in going or not going to the IMF for financial assistance or the arrangement of funds from alternative resources, the country's stock market remains in a tight spot due to uncertainty.

"Considerable progress was made in Russian Federation in recent years to shore up financial stability, including by closing weak banks, introducing reforms to the resolution framework, enacting measures to reduce dollarization, and increasing the risk weights of unsecured consumer and mortgage loans", the International Monetary Fund said.

Tria called for a constructive discussion with Brussels over the budget and said he did not think Italy's deficit forecasts were so shocking.

The IMF says there is a "risk of contagion" as investors become increasingly nervous about the strength of emerging markets, with the risk of capital flows towards the United States accelerating.

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