ibusinesslines.com
ibusinesslines.com December 16, 2018


International Monetary Fund downgrades outlook for world economy to 3.7% growth

09 October 2018, 06:30 | Kelvin Horton

People walk past a mural on a bank showing symbols for American Chinese and other world currencies in Beijing

IMF cuts world economic growth forecasts as import tariffs emerging market issues bite

The Pakistani government has chose to approach the International Monetary Fund (IMF) for a bailout to address the mounting balance of payments crisis faced by the South Asian country, Finance Minister Asad Umar announced on Monday.

The Washington-based institution had predicted a 2019 growth rate of 1.5 percent for Russian Federation in its last update in July.

The IMF said the balance of risks was now tilted to the downside, with a higher likelihood that financial conditions will tighten further as interest rates normalize, hurting emerging markets further at a time when US -led demand growth will start to slow as some tax cuts expire.

At its annual meeting in Bali it downgraded its prediction to 3.7% from 3.9% in July.

Growth estimates for the euro area and Britain were also revised down with the report warning that growth "may have peaked in some major economies".

The IMF added interest rates would need to be increased to deal with inflation but it warned the Bank of England to be flexible so it could change depending on the situation.

And if it continues, the "escalation of trade tensions to an intensity that carries systemic risk is a distinct possibility without policy cooperation".

The value of Chinese loans given to Pakistan over the last 13 months is close to the US$6.2 billion the International Monetary Fund lent it during the last bailout, according to a Bloomberg report in August. The contract lost 0.1 percent to settle at $74.29 per barrel in NY.


"Our probability that we would attach to further bad news has gone up", Obstfeld said.

"Growth is now much more uneven" than six months ago, he told reporters. "Not only have some downside risks we identified in the last WEO been realized, the likelihood of further negative shocks to our growth forecast has risen".

In a damning forecast, the International Monetary Fund is predicting Turkey's gross domestic output will add 3.5 percent this year and only 0.4 percent in 2019.

And it stressed "cooperative solutions" to help boost continued growth in trade "remain essential to preserve and extend the global expansion".

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 US will also see its growth "decline" once its fiscal stimulus, delivered through wide-ranging tax cuts "goes into reverse" according to Mr Obstfeld. Authorities have devalued the rupee multiple times since December.

Adjustments would occur as domestic production displaces higher-priced imports, the model shows, but in the long run, the U.S. GDP would still be 1.0 percent below a baseline without these tariffs, while China's GDP output would be one half percent below the baseline. Alphabet, Google's parent company, fell 1 percent to $1,155.92. China was the fastest growing economy in 2017 as it was ahead of India by 0.2 percentage points.



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