IMF cuts forecast for global economic growth

Lloyd Doyle
October 12, 2018

The IMF expects the U.S. economy to continue growing this year at 2.9%, but sees that rate falling to 2.5% next year amid the country's escalating trade war with China. These risks, it says, while still moderate, could increase significantly.

The dominant United States economy has been shielded from the ill effects so far due to the stimulus provided through tax cuts and spending policies, but that will wear off by 2020.

Tensions have soared in recent months with Donald Trump's administration rolling out billions of dollars in tariffs against China in a bid to tackle its trade deficit and rein in what Washington views as unacceptable trade practices by the Asian giant.

Maurice Obstfeld, IMF's chief economist and director of research said whatever affects the three major economies will affect the whole region as majority of the countries relies on their trajectories.

Trade is among the biggest downside risks to the global economy, Kim told reporters on Thursday in Bali, Indonesia - an emerging economy that he cited as one under threat by a trade dispute.

And if it continues, the "escalation of trade tensions to an intensity that carries systemic risk is a distinct possibility without policy cooperation".

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. For next year, trade is seen growing just four percent, a half point less than the prior forecast.

Thor Equities CEO Joe Sitt on the increasing US trade tensions with China.

It is the first time the fund has cut its forecast in more than two years.


That's a significant downgrade from the IMF's assessment in April, when it projected a 3.9 percent growth rate.

However, the International Monetary Fund cautions that it has a "poor track record of predicting recessions".

It said that the composition of spending and revenues should be growth friendly and protect the most vulnerable.

The IMF predicted United Kingdom growth to would be 1.4% in 2018, rising to 1.5% in 2019, while the eurozone 2018 growth forecast was cut to 2.0% from 2.2%.

"That said, risks could rise sharply, should pressures in emerging-market economies mount or if trade tensions escalate".

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

The tariffs stem from the Trump administration's demands that China make sweeping changes to its intellectual property practices, rein in high-technology industrial subsidies, open its markets to more foreign competition and take steps to cut a $375 billion US goods trade surplus.

The requirements are likely to shine a spotlight on the extent, composition and terms of Pakistan's debts to China for infrastructure projects as part of Beijing's massive Belt and Road building programme.

Other reports by Iphone Fresh

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