Tariff war taking a toll on global growth

Tariff war taking a toll on global growth

Tariff war taking a toll on global growth

The IMF said that monetary policy normalisation and a stronger dollar in the United States has put pressure on the exchange rates in emerging economies like Brazil, India and South Africa, among others.

"There are clouds on the horizon".

USA stimulus also adds to the "already-unsustainable" debt and deficit that will undercut future growth, the report warns.

But the outgoing chief economist - who retires from the Fund later this year - added that it was a "mixed picture" with some Latin American and African nations getting growth forecast upgrades.

"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.

If the trade war continues, it could take a significant bite out of global growth, according to the fund. "For the near term, however, liquidity easing would lead to more currency weakness".

The IMF's cut to its outlook was broad-based.

Ahead of the Bali gathering, the International Monetary Fund reviewed its global growth forecast down 0.2 percent to 3.7 percent for 2018 and 2019 - citing trade tensions, protectionism and rising debt levels as the main causes.

Financial Tensions It said after years of an extremely supportive financial environment, the global economy remains vulnerable to a sudden tightening of financial conditions.

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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.

The fund shaved 0.1 percentage point from America's expected GDP this year and 0.4 percentage points from growth through 2019.

The May federal budget forecast 3 per cent GDP in 2018-19 and the same the following financial year.

One of the most comprehensive studies of the state of banking and markets since the financial crisis warns that "dangerous undercurrents" are a rising threat to the world economy.

The worldwide organisation said that inflation is expected to pick up in India due to a narrowing output gap, and the effects of exchange rate depreciation and rising fuel prices.

For the eurozone, slow growth means less reductions in high unemployment rates in several countries and difficulty keeping on top of high debt levels, while Japan needs growth to ward off risky deflation.

Mr Milesi-Ferretti noted Nigeria's (economic) growth of about 1.9 per cent this year to rise to about 2.3 in 2019, with South African economy, now in technical recession at only 0.8 per cent growth rate this year.

"An IMF team will visit Islamabad in the coming weeks to initiate discussions for a possible IMF-supported economic programme", she said.

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