IMF revises global growth forecasts

IMF revises global growth forecasts

THE International Monetary Fund cut its global growth forecasts yesterday for the first time since July 2016, as trade tensions between the United States and its trading partners have started to hit economic activity worldwide.To get more chinese finance news, you can visit shine news official website.

In an update to its World Economic Outlook, the IMF said it was now predicting 3.7 percent global growth in both 2018 and 2019, down from its July forecast of 3.9 percent growth for both years.

The IMF kept its growth forecast for China at 6.6 percent this year, while shaving its projection for next year to 6.2 percent, down 0.2 percentage points from three months ago, as the trade frictions with the US drag down the world’s second-largest economy.

“Our forecast for China’s 2019 growth has been downgraded due to the tariffs that we have actually seen on the US$200 billion of imports into the US, and that is an impact on China of 0.7 percent of GDP relative to our baseline forecast,” said Maurice Obstfeld, chief economist of the IMF.

“We assume, however, that the 0.5 percentage point of that is offset by the Chinese authorities’ stabilization of the domestic economy, leading to a net fall of 0.2 percent. That set of actions, by the way, also reduces our forecast of US growth for next year because we factor in China’s retaliation,” he added.

As the US unilaterally imposed additional tariffs on some of its main trade partners in the past several months, the IMF warned that “escalating trade tensions and the potential shift away from a multilateral, rules-based trading system” are key threats to the global outlook.

“An intensification of trade tensions, and the associated rise in policy uncertainty, could dent business and financial market sentiment, trigger financial market volatility, and slow investment and trade,” the report said.

“Higher trade barriers would disrupt global supply chains and slow the spread of new technologies, ultimately lowering global productivity and welfare,” the report argued, adding that more import restrictions would push up the prices of consumer goods, thus harming low-income households disproportionately.

The IMF expects the US economy to grow 2.9 percent this year, the fastest pace since 2005 and unchanged from the July forecast.

But it predicts that US growth will slow to 2.5 percent 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.

Obstfeld also said the possibility that China and the US resolve their disagreements would be a significant upside to the forecast.

“We are more tentative in our optimism than we were six months ago because, if you have the world’s two largest economies at odds, that is a situation in which everyone, everyone is going to suffer. So, it would be great if the talks could lead to an accommodation in which disruptions to trade were put aside,” he said.

The IMF maintained its growth forecast of 2.4 percent for advanced economies in 2018, while downgrading its forecast for those economies in 2019 to 2.1 percent, 0.1 percentage points lower than its July forecast.

Growth in emerging markets and developing economies is projected to reach 4.7 percent in 2018 and 2019, 0.2 percentage points and 0.4 percentage points lower than the previous forecasts in July respectively.

The outlook for world trade overall also darkened: The fund expects global trade to grow 4.2 percent this year, down from 5.2 percent in 2017 and from the 4.8 percent it expected in July.

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