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International Monetary Fund slashes global growth forecasts

13 October, 2018, 10:05 | Author: Lawrence Cooper
  • China's yuan currency has faced strong selling pressure this year losing more than 8 per cent between March and August at the height of market worries

In the United States, momentum is still strong as fiscal stimulus continues to increase, but the forecast for 2019 has been revised down due to recently announced trade measures, including the tariffs imposed on $200 billion of U.S. imports from China.

US President Donald Trump recently sanctioned tariffs on an additional Dollars 200 billion worth of Chinese goods, nearly 15 per cent of China's total exports to the US.

Yi also said China would continue to open up its financial markets, including to foreign ratings agencies and bond investors, the attendees said.

The IMF, created in 1945, is an organization of 189 countries, working to foster global monetary cooperation, secure financial stability, facilitate worldwide trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

"We certainly hope we don't move in either direction of a trade war or a currency war".

It also said inflation in India is on the rise, estimated at 3.6 percent in fiscal year 2017/18 and projected at 4.7 per cent in fiscal year 2018/19, compared to 4.5 percent in fiscal year 2016/17, amid accelerating demand and rising fuel prices.

In the fund's latest Global Economic Outlook, it estimated that the South African economy would grow by 0.8% this year, down from its initial projection of 1.5% in April.

The cut its 2019 U.S. growth forecast to 2.5 percent from 2.7 percent previously, while it reduced China's 2019 growth forecast to 6.2 percent from 6.4 percent.

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With much of the US-China tariff war's impact to be felt next year, the Fund cut its 2019 US growth forecast to 2.5 per cent from 2.7 per cent previously, while it cut China's 2019 growth forecast to 6.2 per cent from 6.4 per cent.

The Breton Woods institution, which said this at the Annual General Meetings of the IMF/World Bank now going in Bali, Indonesia, also revised downwards growth prospects for Nigeria in 2018 from 2.1 per cent to 1.9 per cent.

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

"An intensification of trade tensions and the associated further rise in policy uncertainty could dent business and financial market sentiment, trigger financial market volatility, and slow investment and trade", the report said.

It said interest rates could go up quickly depending on events in the US.

The IMF said a "no-deal" Brexit remained a risk.

"An increase in trade barriers would disrupt global supply chains, which have become an integral part of production processes in the past decades, and slow the spread of new technologies, ultimately lowering global productivity and welfare".

IMF-WB meetings organizing committee Susiwijono, who is also secretary to the Coordinating Economic Minister, stressed that the government had anticipatory measures in place for managing natural disasters in coordination with relevant institutions like the Bali Police and the National Disaster Mitigation Agency (BNPB). "This is not true in emerging and developing economies, where financial conditions have tightened markedly over the past six months", he said.

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