IMF's Lagarde warns trade, currency wars could be detrimental for growth

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Global trade tensions would also have a bearing on the eurozone's 2018 growth forecast, which was cut to 2 percent from 2.2 percent previously.

The body now expects the US economy to grow at a rate of 2.5 percent in 2019, a 0.2 percentage point decline from its April estimates.

U.S. President Donald Trump, right, chats with Chinese President Xi Jinping during a welcome ceremony at the Great Hall of the People in Beijing, Nov. 9, 2017.

In its latest World Economic Outlook, the organisation downgraded global economic growth to 3.7% for both 2018 and 2019 - 0.2% lower for both years than had been forecast in April.

The Hang Seng Index closed lower by 0.11 percent or 29.66 points, at 26,172.91 points.

On the global ratings, International Monetary Fund cut its global growth forecasts as a result of the trade tensions between the USA and trading partners.

Rising trade tensions are a key challenge to the world economy as "protectionist rhetoric increasingly turned into action".

The IMF expects a 2.9 percent growth outlook on the USA economy, but thinks growth will shrink to 2.5 percent for 2019, attributing to the slowdown to the country's escalating trade war with China. "Several of the downside risks highlighted in the April 2018 World Economic Outlook (WEO) ... have become more pronounced or have partially materialized".

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Last year, China shipped goods worth $375 billion more to the US than it took in from the United States, a figure Trump has often said he wants to curb sharply in an effort to promote American businesses.

After 18 months consecutive drop in the country's inflation rate from about 15.98 per cent in 2016, the National Bureau of Statistics (NBS) data for August 2018 showed a marginal increase from about 11.14 per cent in July to the current 11.23 per cent. Both figures would mark the slowest rate of Chinese expansion since 1990, when its growth rate was slashed in the aftermath of the violent suppression of pro-democracy protests.

"US growth will decline once parts of its fiscal stimulus go into reverse", Mr Obstfeld said in a statement.

China and the United States have slapped tit-for-tat tariffs over the past few months, rattling financial markets as investors anxious the escalating trade war could knock global trade and investment.

Further out, China's economic growth is expected to slow gradually to 5.6 per cent as the government shifts to "a more sustainable growth path" and addresses financial risks, the International Monetary Fund said.

Lagarde said she remained optimistic that disputes between nations could be ironed out, citing the Trump administration's recent successful renegotiation of the NAFTA agreement between the US, Canada and Mexico.

It left 2018 growth forecasts for the two countries unchanged at 2.9 percent for the United States and 6.6 percent for China.

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