International Monetary Fund warns trade friction, market turmoil to hurt Asian growth
- by Claude Bryan
- in Markets
- — Oct 13, 2018
Disruptive weather in the first few months of the year is partly to blame for the UK's weaker-than-expected economic performance, the International Monetary Fund said, while policy uncertainty, including trade tensions between the United States and China, have played a role in the tempered global expectations.
Although the newly projected rate is same as last year's rate of 3.7 percent, this growth exceeds that achieved in any of the years between 2012 and 2016, and it occurs as many economies have reached or are nearing full employment and as earlier deflationary fears have dissipated.
If projections are true, then India would regain the tag of the fastest growing major economy of the world, crossing China with more than 0.7 percentage point in 2018 and an impressive 1.2 percentage point growth lead in 2019.
The fund said risks to the short-term outlook for the world economy had "shifted to the downside".
The exercise assumes that US President Donald Trump imposes tariffs on the remaining $267 billion worth of Chinese goods imports not already under punitive tariffs and China retaliates in kind. "Notwithstanding the present demand momentum, we have downgraded our 2019 USA growth forecast owing to the recently enacted tariffs on a wide range of imports from China and China's retaliation".
While the damage from an all-out trade war wouldn't be catastrophic, slow growth can also pose problems.
And if it continues, the "escalation of trade tensions to an intensity that carries systemic risk is a distinct possibility without policy cooperation".
"Growth is now much more uneven" than six months ago, he told reporters.
Also on Tuesday, it projected that inflation in Nigeria would increase to 13.5 per cent next year.
300 miles of Florida coastline on hurricane alert
ET Monday , Tropical Storm Michael was centered about 90 miles east of Cozumel, Mexico, the National Hurricane Center said . The rainfall could lead to "life-threatening" flash floods and mudslides in mountainous regions, the hurricane center said.
However, the International Monetary Fund cautions that it has a "poor track record of predicting recessions".
Obstfeld said the world will become a "poorer and more unsafe place" unless world leaders worked together to raise living standards, improve education and reduce inequality.
And it stressed "cooperative solutions" to help boost continued growth in trade "remain essential to preserve and extend the global expansion".
The IMF said in an update to its World Economic Outlook it was now predicting 3.7 per cent global growth in both 2018 and 2019, down from its July forecast of 3.9 per cent growth for both years.
Medium term growth could drop below 1.4 per cent.
The near-term impact of a full-fledged trade war on growth in China will be almost double that of the United States, according to the IMF's estimates.
However, stimulus measures by Beijing are likely to soften the impact of the tariffs.
The worldwide organization also estimates that over the medium-term, growth in China is expected to slow to 5.6 percent, "as the economy continues to make the transition to a more sustainable growth path with continued financial de-risking and environmental controls", the report said.
