International Monetary Fund retains India's growth rate at 7.3% in 2018

13 October, 2018, 05:09 | Author: Clarence Schmidt
  • US / China trade war and Brexit threaten global growth says IMF

Global trade is projected to expand by 4.2 per cent this year, six tenths less than expected in July and almost a full point lower than the forecast in April.

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

While the damage from an all-out trade war wouldn't be catastrophic, slow growth can also pose problems. The IMF's global growth outlook comes as US equities have been feeling downward pressure as of late with rising Treasury yields dominating the financial news.

However, the International Monetary Fund has slashed its global growth forecast for this year and the next to 3.7 per cent owing to escalating trade disruptions between the United States and China.

USA tariffs on China, and more broadly on auto and auto part imports, may disrupt established supply chains, especially if met by retaliation, it added.

However, in a newspaper article, the country's former ambassador to the World Trade Organisation Manzoor Ahmad said China only accounted for 10 per cent or so of Pakistan's loan repayments.

The IMF also took aim at Brexit in its assessment, as it warned how slow progress in thrashing out an European Union divorce deal for Britain is creating "pervasive uncertainty" about future trade costs.

It found that global GDP output under this scenario would fall by more than 0.8 per cent in 2020 and remain roughly 0.4 per cent lower in the long-term compared to levels without these effects, which "inflict significant costs to the global economy, especially through its impact on confidence and financial conditions".


With US GDP growth expected to drop from 2.9 percent this year to 1.8 percent by 2020, the International Monetary Fund also warned about the potential risk of an "inflation surprise", fueled by the same tax cuts and rising spending used to cushion the impact from the trade spat.

It said interest rates could go up quickly depending on events in the US.

The spokesperson was responding to a question on the request made by Pakistan for a $8 billion bailout package.

"An increase in trade barriers would disrupt global supply chains, which have become an integral part of production processes in the past decades, and slow the spread of new technologies, ultimately lowering global productivity and welfare".

The worldwide organisation warned a full-blown trade war between the United States and China could have wider implications for the financial growth around the world.

After 18 months consecutive drop in the country's inflation rate from about 15.98 per cent in 2016, the National Bureau of Statistics (NBS) data for August 2018 showed a marginal increase from about 11.14 per cent in July to the current 11.23 per cent.

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

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