IMF Warns of Risks to Global Growth, Advance Economies to Fall Sharply

Roman Schwartz
January 23, 2019

The IMF is forecasting growth in China of 6.2 per cent this year and next, unchanged from its previous forecasts.

In commodities, global growth worries pulled oil prices lower with Brent down 55 cents at $62.19 and USA crude futures off 39 cents at $53.41.

An ongoing trade war between the world's two largest economies could contribute to slowing economic growth this year, according to the International Monetary Fund (IMF).

She touched on a host of issues from the state of USA economy, global financial health, uncertainties around Brexit and the much talked-about Chinese growth figures.

On Friday, the 10-year yield touched its highest intraday in one month at 2.049 percent.

Ms Gopinath said: 'We've already seen the negative effect of this uncertainty on British investment.

"And while there have been some positive developments in recent weeks, risks remain skewed towards weaker growth, with a "no deal" Brexit and sharper-than-expected slowdown in China getting special mentions".

Global growth for 2019 trimmed by 0.2% to 3.5% from October's projections.

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Populist measures such as farm loan waivers will not solve the problems faced by farmers permanently, but cash transfers are a better solution, said International Monetary Fund chief economist Gita Gopinath. In 2020, India is projected to grow at 7.7 per cent.

Unveiling the forecasts at the World Economic Forum in Davos, Switzerland, IMF managing director Christine Lagarde said: 'After two years of solid expansion, the world economy is growing more slowly than expected.

However, the world´s two largest economies, now the source of most of the risk to global growth, did not see further downward revisions.

He said: 'These developments threaten to fragment the worldwide order that has governed the global economy. For the United States, these include tariffs on solar panels, washing machines, aluminium, and steel announced in the first half of 2018; a 25 percent tariff on $50 billion worth of imports from China, and a 10 percent tariff on an additional $200 billion of imports from China, with the latter rising to 25 percent after the current 90-day "truce" ends on March 1, 2019.

'Risks to global growth tilt to the downside. The Sarb now estimates growth in 2018 to have averaged 0.7 percent up from 0.6 percent in November.

So far, China´s fiscal stimulus has cushioned the impact of the trade disputes.

But it warned the estimate is fraught with uncertainty since "as of mid-January, the shape that Brexit will ultimately take remains highly uncertain". However it raised its forecast for next year by 0.2 percentage points, to 2.1 percent.

Trade tensions and tightening financial conditions in the U.S. and other major economies are the biggest short-term factors in the downward revisions.

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