International Monetary Fund cuts India's growth projection, but it still retains world's top spot

Lloyd Doyle
July 17, 2018

The International Monetary Fund (IMF) on Monday said the Indian economy will grow slower than what it had estimated just three months ago because of higher crude oil prices and speedier interest rate hikes.

As the organisation sounded the alarm amid an escalating trade war between the United States and China, it held firm with its projections for the world as a whole but warned that the "risks to the outlook are mounting".

The IMF, in an update to its World Economic Outlook growth forecasts, said the United States, as the focus of retaliatory tariffs from trading partners, was especially vulnerable to a slowdown in its exports.

"The risk that current trade tensions escalate further with adverse effects on confidence, asset prices and investment is the greatest near-term risk to global growth", IMF Chief Economist Maury Obstfeld told a news conference, noting that USA trade deficits are likely to grow due to high demand, possibly inflaming trade tensions further.

Citing the tariff increases by the USA and retaliation by other countries, it said they "could derail the recovery and depress medium-term growth prospects".

However, the report said that without steps to "ensure the benefits are shared by all, disenchantment with existing economic arrangements could well fuel further support for growth-detracting inward-looking policies".

Despite the cut in growth rate, India will continue to lead among the emerging economies with outperforming its nearest rival China.

The IMF left unchanged its global economic growth forecasts at 3.9 percent for both 2018 and 2019, compared to its previous forecast issued in April.

"For the advanced economies, we project 2018 growth of 2.4pc, down 0.1 percentage point from our April World Economic Outlook projection".

The Japanese economy is forecast to cool to 1 per cent, marking the slowest growth rate among advanced nations - a downgrade of 0.2 per cent - following weak private consumption and investment in the first quarter of the year.

Nigeria is expected to be the standout performer amid recovery in oil prices.

The IMF has scaled down economic growth in Argentina and Brazil, besides India, among emerging market economies.

The IMF, however, warned that if the US Federal Reserve tighten its monetary policy faster than expected, "a broader range of countries could feel more intense pressures". "An escalation of trade tensions could undermine business and financial market sentiment, denting investment and trade", the International Monetary Fund report said.

Global current account imbalances would widen owing to a relatively high demand growth in the United States, the report added.

The fund warns growth could be cut by a half point by 2020 if tariff threats are carried out.

The report noted that global migration pressures were "politically destabilising" and could not be dealt with without cooperative action to "improve worldwide security, support the Sustainable Development Goals, and resist climate change and its effects".

Other reports by Iphone Fresh

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