International Monetary Fund warns of global economic downturn

Roman Schwartz
April 10, 2019

Its forecast for growth in Canada's economy was similarly lowered from 1.9 per cent to 1.5 per cent. Among major current account surplus and deficit countries and regions, the current account surplus of China declined considerably, to 0.4pc of GDP, while the U.S. current account deficit is unchanged at 2.3pc, and the surplus of the Euro area declined marginally to 3pc. That will keep interest rates low. The Dow Jones Industrial Average index fell 0.7 per cent and the S&P 500 and the Nasdaq Composite both closed about 0.6 per cent lower as the growth forecasts and renewed trade worries sparked by new US tariff threats on European aircraft and food products weighed on sentiment.

The United States grew by 2.9 per cent last year and is projected to slow down to 2.3 this year and 1.9 next year, the report said. The 5.2% current account deficit is higher than the estimates of the Finance Ministry.

Both ADB and the RBI last week cut their 2019-20 growth projection for India to 7.2% from 7.4% earlier, blaming rising risks to global economic growth as well as weakening domestic investment activity.

Umar had said Pakistan's economy is out of crisis situation but the stabilisation phase would continue for next one and half years.

"However, the possibility of further downward revisions is high, and the balance of risks remains skewed to the downside", the Fund said in its World Economic Outlook report. The tight policies are pulling back the economic growth rate that will increase unemployment in the country.

In its report on Tuesday, the fund said a worse-case no-deal Brexit scenario involving border delays and financial market turmoil would increase the damage to about 4 percent of GDP by 2021. "Lastly, adequate resources for multilateral institutions remain essential to retain an effective global safety net, which would help stabilize the global economy".

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The IMF foresees the Chinese economy growing 6.3 percent this year, down from 6.6 percent in 2018. Inflation will jump to 7.6 % against the 6% target set in the budget 2018-19, it added. The independent economists have predicted almost 8% jobless rate due to slowing economic growth rate.

The EU's economic growth is already slowing substantially, though the International Monetary Fund said it still expects the slowdown in Europe and some emerging market economies will give way to a re-acceleration in growth during the second half of 2019.

The medium-term outlook for the Middle East, North Africa, Afghanistan, and Pakistan region is largely shaped by the outlook for fuel prices, needed adjustment to correct macroeconomic imbalances in certain economies, and geopolitical tensions, says the International Monetary Fund. Sure, there are a host of factors affecting growth, but what the data underlines is the importance of low crude oil prices for the Indian economy.

"In India, growth is projected to pick up to 7.3% in 2019 and 7.5% in 2020, supported by the continued recovery of investment and robust consumption amid a more expansionary stance of monetary policy and some expected impetus from fiscal policy", the WEO noted.

The International Monetary Fund on Tuesday worsened its forecast for Iran's recession as U.S. sanctions bite, with Tehran's slump denting overall growth in the Middle East and North Africa. Trade tensions increasingly took a toll on business confidence and, so, financial market sentiment worsened, with financial conditions tightening for vulnerable emerging markets in the spring of 2018 and then in advanced economies later in the year, weighing on global demand.

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