China trade war and Brexit threaten global growth says International Monetary Fund

Lloyd Doyle
October 9, 2018

The IMF chief economist said that while government officials have been moving to rein in China's credit expansion, it was understandable they would take steps to boost growth in the face of trade tensions with the US, and these have impacted short-term economic growth, affecting the yuan.

The global body, in its World Economic Outlook, also downgraded its growth forecast for India for 2019-'20 from 7.5% to 7.4%.

It is unclear how much Pakistan will seek to borrow, but the Financial Times and other media outlets have reported that at least US$8 billion is needed to tackle the current crisis. "Any sharp reversal for emerging markets would pose a significant threat to advanced economies".

China's growth is still expected to be more than 6% next year, but the IMF's chief economist Maurice Obstfeld warned Beijing to concentrate on quality and sustainability of growth, not quantity of growth.

"The provision of 10 million jobs and millions of housing units might become the victims as it will become hard to pursue the projects under the tight noose of the International Monetary Fund scrutiny", said one independent economist and added that the International Monetary Fund would pursue one shoe fit for all policy under which the sacrosanct targets of budget deficit and current account deficits would be curtailed by comprising growth and hiking inflationary pressures.

The fund left its 2018 USA forecast unchanged but cut its expectation for next year, citing the impact of the trade conflict.

But on Monday, he decided his finance minister should meet with officials at this week's annual conference of the International Monetary Fund and the World Bank in Bali, Indonesia, to discuss a potential package, the finance ministry said in a statement.

Some energy-rich emerging market countries have fared better due to higher oil prices, with Saudi Arabia and Russian Federation seeing forecast upgrades.

Fed rate hikes are already increasing pressure on emerging market economies by fuelling an outflow of capital as investors seek higher returns.

Maurice Obstfeld, the IMF Economic Counsellor, warned against the rising tide of protectionism, saying that without multilateralism "the world will be a poorer and more unsafe place".

"We'll be listening very attentively when and if they come to us", Obstfeld said. -China trade war, coupled with threatened global US automotive tariffs and retaliation from trading partners.

But it predicts that US growth will slow to 2.5 per cent next year as the effect of recent tax cuts wears off and as US President Donald Trump's trade war with China takes a toll.

Global trade is projected to expand by 4.2 per cent this year - 0.6 per cent less than expected in July - dropping to four per cent next year.

The repercussions for the United States and China would be particularly severe, with 2019 GDP losses of more than 0.9 percent in the United States and 1.6 percent in China in 2019.

It also assumes that Trump imposes a 25% tariff on imported cars and auto parts imports.

Medium term growth could drop below 1.4 percent.

Other reports by Iphone Fresh

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