IMF maintains global growth forecasts, warns of escalating trade tensions

Xinhua
The IMF kept its growth forecasts for the global economy unchanged for this year and next year, but warned of escalating trade tensions that could derail the global recovery.
Xinhua

The International Monetary Fund on Monday kept its growth forecasts for the global economy unchanged for this year and next year, but warned of escalating trade tensions that could derail the global recovery.

In its updated World Economic Outlook report released on Monday, the IMF said global economic growth is projected to reach 3.9 percent in 2018 and 2019, in line with its previous forecasts in April.

"But the expansion is becoming less even, and risks to the outlook are mounting. The rate of expansion appears to have peaked in some major economies and growth has become less synchronized," the report said.

The IMF downgraded its growth forecast of advanced economies in 2018 to 2.4 percent, 0.1 percentage points lower than its April forecast, while maintaining an unchanged forecast of 2.2 percent growth in those economies for 2019.

Growth in emerging markets and developing economies is projected to strengthen to 4.9 percent in 2018 before reaching 5.1 percent in 2019, unchanged from previous forecasts.

The IMF said the balance of risks "has shifted further to the downside," amid rising trade tensions among the United States and its trading partners.

"The recently announced and anticipated tariff increases by the United States and retaliatory measures by trading partners have increased the likelihood of escalating and sustained trade actions," the report said.

"These could derail the recovery and depress medium-term growth prospects, both through their direct impact on resource allocation and productivity and by raising uncertainty and taking a toll on investment," the Washington-based international lender warned.

"Our modeling suggests that if current trade policy threats are realized and business confidence falls as a result, global output could be about 0.5 percent below current projections by 2020," IMF chief economist Maurice Obstfeld said at a press conference.

"As the focus of global retaliation, the United States finds a relatively high share of its exports taxed in global markets in such a broader trade conflict, and it is therefore especially vulnerable," he said.

The report came after the Trump administration unilaterally imposed high tariffs on imported steel and aluminum products, provoking strong opposition from the domestic business community and retaliatory measures from U.S. trading partners.

"The risk that current trade tensions escalate further — with adverse effects on confidence, asset prices, and investment — is the greatest near-term threat to global growth," Obstfeld warned, adding that "countries must resist inward-looking thinking."

"Avoiding protectionist measures and finding a cooperative solution that promotes continued growth in goods and services trade remain essential to preserve the global expansion," the report said.

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