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International Monetary Fund says trade spat curbing growth

12 October 2018

The IMF's latest report on world financial stability, released Wednesday, said global growth could be at risk if emerging markets deteriorate further or trade tensions escalate.

It's so concerned about the potential for a bad deal it has downgraded global economic growth to 3.7% for both 2018 and 2019, in its latest World Economic Outlook.

The fund cut its 2019 U.S. growth forecast from 2.7 per cent to 2.5 per cent, and the China growth forecast from 6.4 per cent to 6.2 per cent. It is projecting a current account of -4.1 per cent of GDP in 2018, -4.0 per cent of GDP next year and-3.6 per cent of GDP.

Those issues are dominating talks at the annual International Monetary Fund and World Bank meetings in Bali, Indonesia on Thursday, as well as a stock-market rout that's spread from the U.S.to Asia.

Mr Milesi-Ferretti noted Nigeria's (economic) growth of about 1.9 per cent this year to rise to about 2.3 in 2019, with South African economy, now in technical recession at only 0.8 per cent growth rate this year.

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%.

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

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She said a safer global economy also means tackling the issue of sustainability, including the existential threat of climate change.

IMF's forecasts for Hong Kong's economic outlook are mixed: it raises its forecast for 2018 by 0.2 percentage points to 3.8%, while cutting its forecast for 2019 by 0.3 percentage points to 2.9%. German growth was revised down to 1.9 percent in both 2018 and 2019 due to a slowdown in exports and industrial production.

Global growth is expected to remain steady at 3.7 per cent in 2020, as the decline in advanced economy growth with the unwinding of the U.S. fiscal stimulus and the fading of the favorable spillovers from United States demand to trading partners is offset by a pickup in emerging market and developing economy growth.

The United States, which strongly influences the International Monetary Fund, has said it will not finance the repayment of Pakistan's Chinese loans.

The UK economy, meanwhile, is expected to grow 1.4 percent this year and 1.5 percent in 2019 - falling behind nearly all of Europe, with the exception of heavily-indebted Italy.

The IMF as usual urged emerging economies to accelerate structural reform measures to strengthen their economic fundamentals in the long term. Interest rates remain low by historical standards, and financial conditions are still supporting growth, it said.

The IMF chief met with Pakistani officials later Thursday and said afterwards that a team would visit Islamabad for talks on a possible bailout of its shaky economy. The acceleration relative to 2016-17 reflects a more supportive external environment, including stronger global growth, higher commodity prices, and improved capital market access, following efforts to improve fiscal balances in the aftermath of the commodity price slump.

International Monetary Fund says trade spat curbing growth