Trade war would slow but not stop global growth

13 October, 2018, 10:02 | Author: Frank Williams
  • International Monetary Fund

Thus, policymakers still have an excellent opportunity to build resilience and implement growth-enhancing reforms, the economic counsellor said.

In several key economies, moreover, growth is being supported by policies that seem unsustainable over the long term.

The IMF also revised down its growth forecast for the country for next year to 2.6 percent, down 0.3 percentage point from its earlier estimate.

"Uncertainty over trade policy is prominent in the wake of U.S. actions (or threatened actions) on several fronts, the responses by its trading partners, and a general weakening of multilateral consultation on trade issues", the report said.

The UK economy is expected to expand by 1.4% this year and 1.5% in 2019. In 2017, India had recorded a 6.7 per cent growth rate.

At the worst, which includes Trump pushing through with tariffs on all Chinese goods and on imports of cars and vehicle parts that spark a round of reprisals, as well as denting confidence and provoking a negative market reaction, the impact would be less than one percentage point on global growth.

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"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", according to the International Monetary Fund.

"The continent could do much better once these economies are on a more solid footing, particularly South Africa and Nigeria, because they are really large and affect a number of countries in their neighbourhood". The acceleration relative to 2016-17 reflects a more supportive external environment, including stronger global growth, higher commodity prices, and improved capital market access, following efforts to improve fiscal balances in the aftermath of the commodity price slump.

It left 2018 growth forecasts for the two countries unchanged at 2.9 percent for the United States and 6.6 percent for China. The rupee was trading at 124.3 at close of business Monday, before the announcement was made.

It found that global GDP output under this scenario would fall by more than 0.8 per cent in 2020 and remain roughly 0.4 per cent lower in the long-term compared to levels without these effects, which "inflict significant costs to the global economy, especially through its impact on confidence and financial conditions".

Separately, the ministry said in a statement that the government, after taking into account the current situation and consultation with the leading economists, chose to approach the International Monetary Fund for stabilisation and an "economic recovery program".

"But there is no denying that the susceptibility to large global shocks has risen", Obstfeld said.

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