International Monetary Fund slashes global growth forecasts

Roman Schwartz
October 10, 2018

It also slashed its outlook this year for 19 countries, including several eurozone member states and emerging markets.

The fund left its 2018 US forecast unchanged but cut its expectation for next year, citing the impact of the trade conflict.

"There are clouds on the horizon".

The US will also see its growth "decline" once its fiscal stimulus, delivered through wide-ranging tax cuts "goes into reverse" according to Mr Obstfeld.

The IMF warned that the world faced a permanent hit to growth if the USA followed through on a threat to impose a 25% on all imported cars, and global tariffs hit business confidence, investment and borrowing costs.

Umar is expected to lead a delegation to attend the annual meeting of the International Monetary Fund and World Bank in Bali, Indonesia from October 12 to 14, where he will start initial talks for the bailout package.

The IMF added interest rates would need to be increased to deal with inflation but it warned the Bank of England to be flexible so it could change depending on the situation.

And it stressed "cooperative solutions" to help boost continued growth in trade "remain essential to preserve and extend the global expansion". The Nasdaq composite lost 0.7 percent to 7,735.95. International Monetary Fund believes that the Chinese economy will grow by 6.6 per cent this year as previously forecasted.

"Owing to these changes, our global 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.

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Crisis-hit Venezuela is expected to enter its sixth year of recession in 2019, with inflation predicted to hit ten million per cent next year.

The latest of these exchanges saw US President Donald Trump impose a 10 percent tariff on $200 billion (£153 billion) worth of Chinese goods in September, which would increase to 25 percent by the end of 2018.

The dominant U.S. economy has been shielded from the ill effects so far due to the stimulus provided through tax cuts and spending policies, but that will wear off by 2020.

In this worst case scenario, the United States economy would take a significant hit, while economic growth in China would drop below 5% in 2019, compared with a current prediction of 6.2%.

The fund kept its forecast for growth in the Chinese economy unchanged at 6.6 percent this year.

9 cut its global economic growth forecasts for 2018 and 2019, saying that trade policy tensions and the imposition of import tariffs were taking a toll on commerce while emerging markets struggle with tighter financial conditions and capital outflows.

"Growth performance varies, however, across countries".

In China, growth is projected to moderate from 6.9 per cent in 2017 to 6.6 per cent in 2018 and 6.2 per cent in 2019, reflecting a slowing external demand growth and necessary financial regulatory tightening, the report said.

Global growth will slow to 3.6 per cent by 2022-2023, as growth in rich nations falls back to potential, it said.

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