Monday, 10 December, 2018

Trade war escalation could trigger global financial crisis

He says efforts are afoot to protect the interests of lower income segments of society He says efforts are afoot to protect the interests of lower income segments of society
Jean Garcia | 12 October, 2018, 08:02

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.

The tariffs stem from the Trump administration's demands that China make sweeping changes to its intellectual property practices, rein in high-technology industrial subsidies, open its markets to more foreign competition and take steps to cut a $375 billion US goods trade surplus.

The IMF's analysis suggests that there is a 5 per cent probability, emerging market economies (excluding China) could face debt portfolio outflows of US$100 billion or more over a period of four quarters (equivalent to 0.6 per cent of their combined GDP), broadly similar in magnitude to the Global Financial Crisis.

In a new assessment issued at its meeting in Bali, Indonesia, the International Monetary Fund predicted that "everyone is going to suffer", as the US and China - the world's two biggest economies - spar over tariffs and other trade issues.

The US growth forecast for 2019 is down from 2.7% to 2.5%. The Trump administration has penalized almost half of all imports from China and has threatened more for the other half.

In a report released on Tuesday, the International Monetary Fund estimated that despite positive policy tailwinds in the USA economy resulting from things like tax reform, growth will be less than previously expected next year, as a result of the trade war.

World Bank President Jim Yong Kim said he's concerned about developing economies losing out from deepening trade tensions, which are being escalated by the U.S.

The possible failure of Brexit negotiations also dampened the eurozone's growth outlook.

Landfall Process For Very Severe Cyclone ‘Titli’ Starts At Odisha’s Gopalpur
The system is now moving northeastwards towards Gangetic West Bengal across Odisha and it will weaken gradually, it said. Titli , which means butterfly in Hindi, has been categorised as a very severe cyclonic storm.

The IMF warned that China's growth even risked declining by a full percentage point by next year in the event of a "worse-case" scenario, involving further tariffs coupled with a collapse in confidence by businesses and markets.

The State Bank of Pakistan said it believes "this adjustment in the exchange rate, along with lagged impact of recent hikes in [interest rates] and other policy measures to contain imports will correct the imbalances in the external account".

The IMF announced it had reduced its outlook on the global economy to a 3.7% growth rate for this year and next, down 0.2% from what it had originally predicted in July.

Rebuilding Fiscal Buffers It noted that public debt has increased in emerging markets over the past decade, and is projected to increase further in numerous largest economies over the next five years.

It said that the composition of spending and revenues should be growth friendly and protect the most vulnerable.

The normalization of monetary policy in the United States as well as a stronger dollar and escalation in trade tensions has already begun to affect emerging market economies, the Fund said.

U.S. stimulus also adds to the "already-unsustainable" debt and deficit that will undercut future growth, the report warned. The country returned to a growth rate of 1.5 percent in 2017 after two years of decline.

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