IMF Downgrades Global Economy

 09 Oct 2018 02.57pm

The International Monetary Fund (IMF) has downgraded its growth forecast for the global economy, and blamed uncertainty caused by the US-China trade war.

In its latest ‘World Economic Outlook’, (WEO) the IMF’s has predicted that the global economy will grow by 3.7% in 2018, down from the 3.9% it predicted in April 2018.

Maurice Obstfeld, the IMF’s economic counsellor, said at a press conference in Bali, Indonesia, after the report was released, admitted the April forecast was “overoptimistic” and that growth was “less balanced than we hoped”.

The slowdown has been caused predominantly by the world’s two largest economies – the US and China – engaging an increasingly damaging trade war.

In September 2018 Donald Trump imposed tariffs worth $200 billion on Chinese goods and threatened to sign off on a further $267 billion – an escalation in a tariff war that, at that point, had only seen both countries levy tit-for-tat duties on each other’s imports.

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Furthermore, the IMF also scaled back its previous forecasts for both national economies, saying US growth start to slow once its fiscal stimulus stops.

Obstefeld commented: “Last April, at the time of our last World Economic Outlook, the world economy's broad‑based momentum led us to project a 3.9 percent growth rate for both this year and next.

“Considering developments since then, however, that number now appears overoptimistic. Rather than rising, growth has plateaued at 3.7 percent.

“There are clouds on the horizon. Growth has proven to be less balanced than we had hoped.

“Not only have some downside risks that the last WEO identified been realized, the likelihood of further negative shocks to our growth forecast has risen.

“In several key economies, moreover, growth is being supported by policies that seem unsustainable over the longer term. These concerns raise the urgency for policymakers to act.”

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