International Monetary Fund gives Greece optimistic figures on growth and unemployment

Muriel Colon
October 13, 2018

If projections are true, then India would regain the tag of fastest growing major economies of the world, crossing China with more than 0.7 percentage point in 2018 and an impressive 1.2 percentage point growth lead in 2019. But US growth will decline once parts of its fiscal stimulus go into reverse.

The trade confrontation weighs on China in particular, where growth is projected to slow to 6.6 per cent this year and 6.2 per cent in 2019, a downgrade of 0.2 points.

The IMF also revised down its growth forecast for the country for next year to 2.6 percent, down 0.3 percentage point from its earlier estimate.

Noting that growth in the United States, buoyed by a procyclical fiscal package, continues at a robust pace and is driving USA interest rates higher, Mr. Obstfeld said U.S. growth will decline once parts of its fiscal stimulus go into reverse. "In this environment, economic growth will likely slow significantly, and inflation will rise", he said in a statement.

"Trade policy reflects politics and politics remain unsettled in several countries, posing further risks", said Maurice Obstfeld.

"But there is no denying that the susceptibility to large global shocks has risen", Obstfeld said.

The World Bank last week cut SA's GDP growth estimate for 2018 to 1% this year from 1.4%, while the SA Reserve Bank slashed its forecast to 0.7% from 1.2% in September. Iran, facing a new round of USA sanctions next month, also saw its growth forecast cut, the International Monetary Fund said.

The IMF only published country forecasts through 2019. "Growth has proven to be less balanced than hoped".

Trade tensions are expected to continue although Fund officials view US-Mexico-Canada trade agreement as a positive sign.

"We will be listening very, very attentively when and if they come to us", said Obstfeld.

In broader terms, with the effects of the imposition and the countering of duties by the United States and China to be felt in 2019, the International Monetary Fund reduced its estimates of growth for the U.S. to about 2.5% for 2019, which again is a reduction of about 0.2% from its initial estimate of 2.7%.

The United States and China have slapped tit-for-tat tariffs on hundreds of billions of dollars of each other's goods over the past few months, rattling financial markets as investors worry that the escalating trade conflict could knock global trade and investment.

Washington has also imposed tariffs on steel and aluminium, citing national security concerns, and has also warned it could impose a 25% levy on imported cars and auto parts.

The US simultaneously threatened to add tariffs to a further $267 billion (£205 billion) of products, which saw China retaliate with 10 percent tariffs on $60 billion (£46 billion) of US imports.

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