Wednesday, 12 December, 2018

Brexit uncertainty weighing on Europe's economy, International Monetary Fund says, while global growth downgraded

He says efforts are afoot to protect the interests of lower income segments of society He says efforts are afoot to protect the interests of lower income segments of society
Ginger Lawrence | 12 October, 2018, 08:02

It left 2018 growth forecasts for the two countries unchanged at 2.9 percent for the US and 6.6 percent for China.

Trump has led the escalating trade war because of what he believes are bad policies he said have created an $800 billion USA trade deficit.

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

"Should market participants start pricing in the possibility of protracted trade tensions, financial conditions could tighten significantly, increasing the tail risk to global growth and financial stability", according to Global Financial Stability Report issued by the International Monetary Fund at its annual meetings in Bali. "Trade tensions have emerged, and a further escalation may damage market sentiment and significantly harm global growth", it said.

Trump has levied or threatened tariffs on goods from economies around the world, notably China, but also on traditional allies such as the European Union.

The half-yearly Global Financial Stability Report released on Wednesday finds a 5 per cent probability that these emerging economies could see debt outflows of US$100 billion or more, representing 0.6 per cent of their combined GDP, over a period of four quarters.

The United States and China - the world's two biggest economies - are sparring over Beijing's aggressive effort to challenge American technological dominance.

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The State Bank of Pakistan said it believes "this adjustment in the exchange rate, along with lagged impact of recent hikes in [interest rates] and other policy measures to contain imports will correct the imbalances in the external account".

The fund urged governments to focus on policies that could share the benefits of growth more widely, helping counter the growing mistrust of institutions and avoiding "protectionist reactions to structural change".

Pakistan's currency plunged by almost 7 percent after the government said it would seek emergency bailout loans from the International Monetary Fund (IMF).

Global trade is projected to expand by 4.2 percent this year - 0.6 percent less than expected in July - dropping to 4 percent next year.

A severe recession would slash U.S. public wealth by about United States dollars 5 trillion, causing vastly more damage to Washington's finances than just an increase in debt and deficits, the International Monetary Fund has warned.

An intensification of concerns about emerging markets, a broader rise in trade tensions, the realization of political and policy uncertainty, or a faster-than-expected tightening in monetary normalization could all lead to a sharp tightening in financial conditions, it pointed out.

U.S. stimulus also adds to the "already-unsustainable" debt and deficit that will undercut future growth, the report warned. German growth was revised down to 1.9 percent in both 2018 and 2019 due to a slowdown in exports and industrial production.