Economy

Trade war would slow but not stop global growth

Trade war would slow but not stop global growth

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.

In the latest report, Taiwan's major trade partner South Korea is projected to grow 2.8% and 2.6% for 2018 and 2019, respectively, downward revisions by 0.2 and 0.3 percentage points from previous forecasts.

The IMF, whose autumn meetings with the World Bank get under way on the Indonesian resort island of Bali this week, also noted that while the banking system has been shored up by regulators in the decade since the 2008 global financial crisis, easy financial conditions are contributing to a buildup of vulnerabilities such as high debt levels and "stretched" asset valuations.

"Owing to these changes, our worldwide growth projections for both this year and next are downgraded to 3.7 per cent, 0.2 percentage point below our last assessments and the same rate achieved in 2017", the report 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.

The fund upgraded its forecast for Japan slightly to 1.1 per cent growth this year, up 0.1 point from July.

"If you look at emerging market economies, that includes India, you see that private debt in the last 10 years has increased quite substantially, although in the last two years, since the end of 2015, 2016 and 2017, there is a slowdown in the process of leveraging, but debt is very high and public debt is a very high as well", Gasper said.

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The IMF outlook already projects global growth will slow to 3.6 percent during 2022 - 2023.

Growth forecasts for emerging markets were given a more severe haircut by the Washington-based lender. Global growth will slow to 3.6 per cent by 2022-2023, as growth in rich nations falls back to potential, it said.

With weakening growth and uncertainties over trade, smoothing the economic impact of de-risking "is a very hard act of judgment that policymakers in China have to struggle with", Vitor Gaspar, director of the IMF's fiscal affairs department, told reporters at a separate briefing on its Fiscal Monitor, a report that tracks the state of countries' public finances, on Wednesday. "Any sharp reversal for emerging markets would pose a significant threat to advanced economies", said Obstfeld.

"Once governments understand the size and nature of public assets, they can start managing them more effectively", the International Monetary Fund said in the report. Indonesia has been swept up in the market turmoil triggered by rising US interest rates and a stronger dollar, which has pushed the rupiah down 11 percent this year.

Khan's decision came after the Pakistani stock markets tumbled by 3.4 percent on Monday after Khan said the day before that he was still exploring options outside the International Monetary Fund.

It also said interest rates would need to rise to curb inflation, but urged the Bank of England to remain "flexible" depending on what happens with Brexit.


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