Amid trade tensions, International Monetary Fund marginally cuts India's growth rate

17 Julio, 2018, 09:40 | Author: Arnold Perez
  • GETTYthe IMF sees Berlin and Paris’ economy growth predictions shrink by 0.3 percent by the end of 2018

The global economy is still expected to grow at a solid pace this year, but worsening trade confrontations pose serious risks to the outlook, the International Monetary Fund said Monday.

As the organisation sounded the alarm amid an escalating trade war between the United States and China, it held firm with its projections for the world as a whole but warned that the "risks to the outlook are mounting".

India's growth rate is expected to rise from 6.7% in 2017 to 7.3% in 2018 and 7.5% in 2019, as drags from the currency exchange initiative and the introduction of the Goods and Services Tax fade, said the IMF's latest World Economic Outlook (WEO) update.

Although the global recovery is in its second year, growth has "plateaued" and become less balanced, and "the risk of worse outcomes has increased", Obstfeld said in a statement.

Citing the tariff increases by the U.S. and retaliation by other countries, it said they "could derail the recovery and depress medium-term growth prospects".

Still, he said that growth momentum was slowing.

GETTYThe IMF says the state of France’s economy will further worsen in 2019
GETTYThe IMF says the state of France’s economy will further worsen in 2019

The IMF's updated World Economic Outlook forecast global growth of 3.9 percent this year and next, despite sharp downgrades to estimates for Germany, France and Japan. Growth in China is projected to moderate from 6.9% in 2017 to 6.6% in 2018 and 6.4% in 2019. For the region, growth is expected to increase from 2.8 percent in 2017 to 3.4 percent this year, rising further to 3.8 percent in 2019 (0.1 percentage point higher for 2019 than forecast in the April WEO).

The Japanese economy is forecast to cool to 1 per cent, marking the slowest growth rate among advanced nations - a downgrade of 0.2 per cent - following weak private consumption and investment in the first quarter of the year. Crude oil prices retreated below $71 a barrel on Monday ahead of a summit between United States president Donald Trump and Russian president Vladimir Putin.

The IMF warned that some large economies in Latin America, emerging Europe, and Asia will growth at rates below its April forecasts. "For the aggregate of emerging market economies, the upward and downward revisions largely offset each other", the report added. Both factors highlighted in the report apply to Pakistan.

The fund warns growth could be cut by a half point by 2020 if tariff threats are carried out.

"As the focus of global retaliation, the United States finds a relatively high share of its exports taxed in global markets in such a broader trade conflict, and it is therefore especially vulnerable", Obstfeld added. "An escalation of trade tensions could undermine business and financial market sentiment, denting investment and trade", the International Monetary Fund report said.

The report noted that political uncertainty had risen in Europe since April and the European Union faced fundamental political challenges regarding migration policy, fiscal governance, norms concerning the rule of law, and the euro area institutional architecture.

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