Economy

IMF says Pakistan has not approached fund for deal

IMF says Pakistan has not approached fund for deal

In a new simulation exercise to show trade war risks to the global economy, the International Monetary Fund modeled the effect of an all-out US-China trade war, coupled with threatened global US auto tariffs and retaliation from trading partners. China's economy grew 6.9 per cent in 2017.

Instead it now looks like it is going to have to rein in spending and increase taxes.

The euro area will expand 2 per cent this year, down 0.2 point from July, as a result of weaker than expected growth in the first half of the year.

Pakistan's current account deficit widened 43 percent to $18 billion in the fiscal year that ended June 30, while the fiscal deficit has ballooned to 6.6 percent of gross domestic product. In addition, regulatory duties on non-essential imports have had to be introduced to curb the unnecessary growth in imports.

China's involvement in Pakistan's economy could bring both benefits and risks, Maurice Obstfeld said.

Growth in the 19-nation zone is forecast to slow further to 1.9 percent in 2019, unchanged from the July estimate.

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U.S. stocks opened lower on Tuesday, pressured by rising yields and after the International Monetary Fund cut its global growth forecasts, squarely blaming the Sino-U.S. trade war.

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

Islamabad has cut the size of the biggest Chinese "Silk Road" project in Pakistan, a reconstruction of the main rail line between the port city of Karachi and Peshawar in the northwest by $2 billion, citing government concerns about the country's debt levels.

Medium term growth could drop below 1.4 per cent. The Outlook said the global economy is expected to grow at 3.7 percent this year and next year - down 0.2 percentage points from an earlier forecast, as the trade war started to hit economic activity worldwide. "In the case of a flexible exchange rate regime and a further utility price hike, the country would have to face massive inflationary pressure that would trigger unemployment and poverty", Wizarat said. But it predicts that US growth will slow to 2.5 percent next year as the effect of recent tax cuts wears off and as President Donald Trump's trade war with China takes a toll.

However, stimulus measures by Beijing are likely to soften the impact of the tariffs.

"Notwithstanding the present demand momentum, we have downgraded our 2019 United States growth forecast owing to the recently enacted tariffs on a wide range of imports from China and China's retaliation".


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