Tuesday, 11 December, 2018

The IMF again downgrades outlook for the global economy

The IMF again downgrades outlook for the global economy The IMF again downgrades outlook for the global economy
Nellie Chapman | 11 October, 2018, 10:09

The global finance agency dropped its projection for world economic growth by two-tenths of a percentage point for both 2018 and 2019 to 3.7 percent, the first time it had trimmed its economic outlook in more than two years.

The IMF has slashed its latest growth forecasts, downgrading the US, China, the eurozone and the United Kingdom, as tit-for-tat tariffs bite.

UBG chairman and FPCCI former president Iftikhar Malik said the IMF programme will come with specific external, fiscal and monetary measures, which will likely result in slowdown in GDP growth to around 4 percent compared to GDP growth of 5.8 percent in FY18, besides further hike in interest rates. The S&P 500 fell for the fourth straight day Tuesday while the Cboe Volatility Index, also known as the VIX or Wall Street's fear gauge, neared 16, exceeding this year's average. China was the fastest growing economy in 2017 as it was ahead of India by 0.2 percentage points.

The Federal Reserve, the US central bank, has raised short-term USA rates three times this year as the American economy gains strength more than nine years after the end of the Great Recession.

The IMF said a new data base in its semi-annual Fiscal Monitor report showed considerable net worth in 31 countries that account for 61 per cent of global economic output.

Growth in the 19-nation zone is forecast to slow further to 1.9 percent in 2019, unchanged from the July estimate.

"Risks to global growth skew to the downside in a context of elevated policy uncertainty", the International Monetary Fund wrote.

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.

He said: "It is good for development to be able to participate in global capital markets to fund things like infrastructure projects and to sustain investment in countries".

"Where we are now is we've gotten some bad news".

The model also includes the effects of a reduction in business confidence that reduces investment and leads to a tightening of financial conditions.

Trump renewed his threat to impose tariffs on $267 billion worth of additional Chinese imports if Beijing retaliates further with its own higher levies on USA products entering China.

Global economic expansion remains strong, but the trade war could potentially shock investor confidence, with "significant adverse consequences" for global macroeconomic activity, Tobias Adrian, IMF monetary and capital markets department director, told reporters.

It also assumes that Trump imposes a 25% tariff on imported cars and auto parts imports.

He contended that China had "already retaliated" against his tariff increases.