IMF says Pakistan has not approached fund for deal

Andrew Cummings
October 12, 2018

The International Monetary Fund (IMF) on Tuesday downgraded its outlook for the world economy, warning that the imposition of import tariffs between the USA and China were taking its toll on global trade.

In its latest World Economic Outlook, the organisation downgraded global economic growth to 3.7% for both 2018 and 2019 - 0.2% lower for both years than had been forecast in April.

It is the first time the fund has cut its forecast in more than two years.

It cited US tariffs on solar panels, washing machines, steel and aluminum, in addition to retaliation by trade partners, as potentially depressing factors. But we need to do it (go to IMF) before our reforms start yielding results in about six months, Khan said.

In a downcast assessment on the global economy, the International Monetary Fund pointed the finger at trade policy tensions as part of its reason for predicting slower global growth.

Combined with the trade tensions, this had created "a bit of an unprecedented situation" for the world economy, she said.

Yet, even in its worst case scenario, the International Monetary Fund found that the disruption won't kill off growth and drag the global economy into recession.

Finance ministers and central bankers from numerous IMF's 189 member nations are meeting in Bali this week where concerns about protectionism have taken centre stage - especially the escalating trade war between the United States and China. The number is the same as last year's 3.7 percent growth. But growth could weaken significantly further if additional trade protectionist measures are put in place, it said.

"We've talked about deleveraging for many years".

If the trade war continues, it could take a significant bite out of global growth, according to the fund.

It predicted 2.9 percent US growth this year, dropping to 2.5 percent next year, and to 1.8 percent in 2020, as the effect of USA tax cuts wears off and the trade war with China inhibits growth.

"Since mid-April, rising U.S. interest rates and a stronger United States dollar - coupled with intensified trade tensions - have triggered a reversal in portfolio flows, an increase in borrowing costs, and a weakening in local currencies in some emerging markets", the report noted.

Fed rate hikes are already increasing pressure on emerging market economies by fueling an outflow of capital as investors seek higher returns.

This would mark China's weakest growth since 1990 and the impact could be harsher - a decline of 1 percentage point or more - if a worst-case trade war scenario were to materialise.

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%.

Both of those figures would mark the slowest rate of expansion for China since 1990, when growth shuddered in the aftermath of the violent suppression of massive Tiananmen Square pro-democracy demonstrations the previous year.

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