Saturday, 15 December, 2018

International Monetary Fund downgrades SA's 2018 growth forecast to 0.8%

Currency dealers say market movements triggered by PM's remarks about approaching IMF for bailout. ─ Reuters  File Currency dealers say market movements triggered by PM's remarks about approaching IMF for bailout. ─ Reuters File
Melinda Barton | 09 October, 2018, 15:29

"However, it is projected to rise to 5.1 percent in 2019", the report said.

Mr Obstfeld said: "Governments have less fiscal and monetary ammunition than when the global financial crisis broke out ten years ago".

"US growth will decline once parts of its fiscal stimulus go into reverse", Mr Obstfeld said in a statement.

"Going to the International Monetary Fund is a positive trigger because it will remove the underlying causes for concern, which is that government targets will further weaken", said Suleman Maniya, head of research at local brokerage house Shajar Capital.

Germany, the economic powerhouse of Europe, could be particularly hard hit by a drop in manufacturing orders and trade volumes.

In the fund's latest Global Economic Outlook, it estimated that the South African economy would grow by 0.8% this year, down from its initial projection of 1.5% in April.

The IMF warned that China's growth even risked declining by a full percentage point by next year in the event of a "worse-case" scenario, involving further tariffs coupled with a collapse in confidence by businesses and markets. It now expects the global economy to only expand by 3.7% in 2018 and 2019, down from 3.9% before. "Any sharp reversal for emerging markets would pose a significant threat to advanced economies", he added.

He said the aggregate growth rate of Africa is being held down by its three largest economies.

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

The dominant USA 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.

Trade tensions are expected to continue although Fund officials view US-Mexico-Canada trade agreement as a positive sign.

Maurice Obstfeld, Economic Counsellor and Director of IMF (L) and Wafa Amr, Communication Officer of IMF, react during their press conference at the 2018 International Monetary Fund (IMF) World Bank Group Annual Meeting at Nusa Dua in Bali, Indonesia, October 9, 2018 in this photo taken by Antara Foto. On Monday, the currency was trading at 128 per USA dollar on the open market and 124.20 in the official interbank rate. Output could fall by more than 1.6 per cent in China and over 0.9 per cent in the United States next year, according to the IMF's models.

That includes President Donald Trump's imposition of tariffs on $250 billion in Chinese goods, as well as on aluminum, steel and other products worldwide.

China's yuan currency has faced strong selling pressure this year, losing over 8 percent between March and August at the height of market worries, though it has since pared losses as authorities stepped up support.

"We'll be listening very attentively when and if they come to us", Obstfeld said. German growth was revised down to 1.9 percent in both 2018 and 2019 due to a slowdown in exports and industrial production.