Economy

International Monetary Fund cuts global growth forecast to joint lowest level since crisis

International Monetary Fund cuts global growth forecast to joint lowest level since crisis

What is the IMF Global Economic Outlook report?

The global lender's semi-annual World Economic Report pointed to the U.S. For third countries, trade diversion offsets negative spillovers from value chain links with China and the United States.

The report said escalation of US-China trade tensions, macroeconomic stress in Argentina and Turkey, disruptions to the auto sector in Germany, tighter credit policies in China and financial tightening alongside the normalisation of monetary policy in the larger advanced economies have all contributed to a significantly weakened global expansion, especially in the second half of 2018 caused a slower than projected global growth. The world engaged in co-ordinated fiscal stimulus to counter the 2008 financial crisis.

Unveiling its latest forecasts before this week's spring meeting, the global economics watchdog downgraded world growth for 2019 from 3.5 per cent to 3.3 per cent.

Inflation is expected to average 3.9 percent this fiscal, higher than last fiscal, but still below RBI's target of four percent.

More than two-thirds of the expected slowdown in 2019 stems from troubles in rich nations, including members of the EU.

What the report said about the global economy.

One potential misstep lies in Britain's indecision over how to leave the European Union. Despite looming deadlines, London has not decided how it will try to shield its economy during the exit process.

Its global growth forecast for 2019 was also lower than the earlier projection of 3.7 percent in the October 2018 WEO. That will keep interest rates low.

The IMF expects growth to pick up in the second half of the year driven by an accommodative policy stance in advanced economies, the prospects of easing of trade tensions between the US and China and ramped up fiscal and monetary stimulus by China to counter the trade war's effects.

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From the IMF World Outlook Report is it clear that Fund is more bullish and optimistic about the growth of the economy than even government.

Cuts eurozone growth to 1.3% from 1.6%. "Depending on circumstances, this may require synchronized though country-specific fiscal stimulus across economies, complemented by accommodative monetary policy", she added.

U.S. Treasury Secretary Steven Mnuchin disputed the IMF's assessment that U.S. growth was slowing and told lawmakers he was not concerned about a recent inversion of the Treasury yield curve - often a harbinger of recession.

Raises 2019 China growth forecast to 6.3% from 6.2%.

The ADB said that India's growth will tick up from 7 per cent last year to 7.2 per cent this year and 7.3 per cent next year fuelled by stronger consumption.

The IMF sees Canada's economy rebounding in 2020, to a growth rate of 1.9 per cent.

The IMF further kept projection for unemployment rate unchanged at 6.1 percent in 2019 compared with the previous year and ratcheted it up to 6.2 percent in 2020. -China trade war did not materialize.

Still, America's ongoing tensions with China and other major trading partners continue to cloud the global economy. For the US, however, upstream tariffs are more important as intermediate imports from China plays a relatively bigger role.

Canada is barely addressed in the text of the report, although it did note that the country would be one of the biggest beneficiaries if the US continues to apply tariffs to products from China.

In terms of policy priorities, the International Monetary Fund has called for a "continued implementation of structural and financial sector reforms" in order to lower public debt and aid growth.


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