Friday, 16 November, 2018

International Monetary Fund downgrades outlook for world economy to 3.7% growth

US / China trade war and Brexit threaten global growth says IMF IMF predicts India will grow at 7.3% in 2018-’19
Glenn Montgomery | 13 October, 2018, 05:03

Released in Bali during the annual meeting of the International Monetary Fund and the World Bank, the IMF's flagship WEO said its 2019 growth projection for China is lower than in April, given the latest round of USA tariffs on Chinese imports, as are its projections for India.

The IMF's World Economic Outlook report, unveiled on the eve of its upcoming summit in Bali, Indonesia, estimated that global growth in 2018 would reach 3.7 percent, the same as the previous year but lower than the 3.9 percent it had forecast earlier this year.

The trade deficit has gone up 8.6 percent this year to $31 billion. "Growth has proven to be less balanced than we had hoped", said IMF Chief Economist Maurice Obstfeld.

At a meeting on the Indonesian island of Bali, the International Monetary Fund painted a cautious picture for the near future, saying trade tensions and rising debt levels could dent China and the U.S., and leave developing economies especially vulnerable to sudden stresses.

With much of the U.S.

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%.

The IMF said that global growth rates have hit a plateau at 3.7%, and would continue to remain at this level in 2019-'20. "Looking ahead, renewed impetus to reform labour and land markets, along with further improvements to the business climate are also crucial (in India)", it said.

The IMF's latest Global Financial Stability report said near-term risks had increased over the past six months but added investors were "complacent" to the potential for a market correction.

Among emerging market and developing economies, the growth prospects of many energy exporters have been lifted by higher oil prices, but growth was revised down for Argentina, Brazil, Iran, and Turkey.

It left 2018 growth forecasts for the two countries unchanged at 2.9 percent for the United States and 6.6 percent for China.

Growth forecasts for emerging markets were given a more severe haircut by the Washington-based lender. Furthermore, rising interest rates will also divert investment capital from emerging markets, causing further pain overseas. One is NAFTA where a new trilateral agreement awaits legislative approval from the U.S., Canada, and Mexico.

"We will get out of this. Our probability that we would attach to further bad news has gone up", Obstfeld said.

The IMF said the downgrade "partially reflects the negative effects of the recently introduced trade measures".

Yi also expressed his confidence in the progress of this campaign to reduce financial risks.

The Singapore Straits Times Index also closed lower, down 0.47 percent or 14.85 points, at 3,166.60 points.

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