International Monetary Fund cuts global economic growth target to 3.7%

Punjab CM Usman Buzdar welcoming PM Imran Khan. — PTI

Punjab CM Usman Buzdar welcoming PM Imran Khan. — PTI

Thor Equities CEO Joe Sitt on the increasing USA trade tensions with China.

The Russian economy will grow faster than previously expected as the macroeconomic outlook improves, the International Monetary Fund (IMF) forecasts.

In this worst case scenario, the USA economy would take a significant hit, while economic growth in China would drop below 5% in 2019, compared with a current prediction of 6.2%.

"The forecast does not incorporate the impact of further tariffs on Chinese and other imports threatened by the United States, but not yet implemented, due to uncertainty about their exact magnitude, timing, and potential retaliatory response", the International Monetary Fund said.

Based on its July and September 2018 IMF Staff Report (part of Article IV assessment), it projected 6.7 percent growth for next year.

A similar warning was also conveyed by the IMF "Global Financial Stability Report" released last week, pointing out that the tightening United States' monetary policy, coupled with trade uncertainties, have discouraged capital inflows to emerging economies, weakened their currencies and depressed equity markets.

According to the WEO report, growth is on the mend for sub-Saharan Africa, with the region's average growth projected to rise to 3.1 per cent in 2018 (from 2.7 per cent in 2017) and 3.8 per cent in 2019.

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"Since mid-April, rising USA interest rates and a stronger United States dollar - coupled with intensified trade tensions - have triggered a reversal in portfolio flows, an increase in borrowing costs, and a weakening in local currencies in some emerging markets", the report noted.

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.

The Fed's rate hikes have already piled pressure on emerging market economies, increasing the risk of capital outflows as investors seek higher returns. South Africa, only 0.8 per cent this year; Angola, contracting by 0.1 per cent this year.

Some energy-rich emerging market countries have fared better due to higher oil prices, with Saudi Arabia and Russian Federation receiving upgrades to growth forecasts.

How bad could the trade war get?

He said the talks would be held for "such a programme, a stabilisation, a recovery programme, on which basis we could overcome this financial crisis". The end-of-period inflation projection, in the meantime, is 5.2 percent for this year and 3.7 percent for 2019. Less than 1 percent of the nation's more than 200 million people file tax returns and its exports, including textiles, lag the region.

The International Monetary Fund has warned a trade war between the U.S. and China risks making the world a "poorer and more unsafe place" in its latest assessment of the global economy.

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