Global growth has reached plateau at 3.7%; clouds on the horizon: IMF

Posted by Daily Shipping Times on 11-10-2018        Tweet

GENEVA: Global growth has plateaued at 3.7 per cent, the International Monetary Fund (IMF) said recently, with its Chief Economist warning the world that there are clouds on the horizon and growth has proven to be less balanced than hoped.

"Last April, the world economy's broad-based momentum led us to project a 3.9 per cent growth rate for both this year and next.

"It occurs as many economies have reached or are nearing full employment and as earlier deflationary fears have dissipated. Thus, policymakers still have an excellent opportunity to build resilience and implement growth-enhancing reforms," Obstfeld said.

"Notwithstanding the present demand momentum, we have downgraded our 2019 US growth forecast owing to the recently enacted tariffs on a wide range of imports from China and China's retaliation," he said, adding that China's expected 2019 growth is also marked down.

Domestic Chinese policies are likely to prevent an even larger growth decline than the one IMF projected, but at the cost of prolonging internal financial imbalances, he said.

"Overall, compared with six months ago, projected 2018-19 growth in advanced economies is 0.1 percentage point lower, including downgrades for the euro area, the United Kingdom, and Korea. The negative revisions for emerging market and developing economies are more severe, at -0.2 and -0.4 percentage point, respectively, for this year and next year," Obstfeld said.

Many emerging economies, he noted, are managing relatively well given the common tightening they face using established monetary frameworks based on exchange rate flexibility.