IMF Downgrades Global Economy

12 October, 2018, 08:01 | Author: Regina Silva
  • President Trump addresses the International Association of Chiefs of Police at its annual convention Monday in Orlando

The Outlook said the global economy is expected to grow at 3.7 percent this year and next year - down 0.2 percentage points from an earlier forecast, as the trade war started to hit economic activity worldwide.

The body now expects the USA economy to grow at a rate of 2.5 percent in 2019, a 0.2 percentage point decline from its April estimates.

Lagarde said in a statement that Pakistan requested the International Monetary Fund assistance during a meeting with Finance Minister Asad Umar and central bank governor Tarik Bajwa on the sidelines of the International Monetary Fund and World Bank annual meetings in Bali. The acceleration relative to 2016-17 reflects a more supportive external environment, including stronger global growth, higher commodity prices, and improved capital market access, following efforts to improve fiscal balances in the aftermath of the commodity price slump. In September, Trump imposed tariffs on almost $200 billion of Chinese imports, with China responding with higher tariffs on about $60 billion of US imports.

The United States and China - the world's two biggest economies - are sparring over Beijing's aggressive effort to challenge American technological dominance.

Growth estimates for the euro area and Britain were also revised down with the report warning that growth "may have peaked in some major economies".

Also, the International Monetary Fund admits that though oil producing countries like Nigeria are going to benefit from higher prices, it sees signs of lower investment in manufacturing, coupled with weaker trade growth.

When the world´s two biggest economies - the USA and China - are "at odds", that is going to create "a situation where everyone is going to suffer", Obstfeld said.

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The IMF outlook already projects global growth will slow to 3.6 percent during 2022 - 2023. "This is the United States trying stop China's growth - it's a awful idea", Sachs, director of the Center for Sustainable Development at Columbia University, told a seminar in Bali.

Broadly speaking, global financial conditions remain accommodative and supportive of near-term growth, albeit somewhat tighter than six months ago.

The half-yearly Global Financial Stability Report released on Wednesday finds a 5 per cent probability that these emerging economies could see debt outflows of US$100 billion or more, representing 0.6 per cent of their combined GDP, over a period of four quarters. Economists now say the chances of a recession in the United States are growing due to several factors, including trade tensions and mounting interest rates.

According to Gasper, in emerging market economies private debt has risen much faster than public debt.

USA stimulus also adds to the "already-unsustainable" debt and deficit that will undercut future growth, the report warned.

In its latest World Economic Outlook Report on World Economy and Financial Surveys, the Bretton Woods institution said inflation will average 8 per cent in 2018 and 2019 respectively.

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