International Monetary Fund warns rising trade tensions threaten to derail global growth

PM Barrow to meet with IMF and OAS
IMF and China join hands to tackle looming debt problems
Author

18 April, 2018

While the world economy is set to expand by 3.9pc this year and next, this will trend downwards from 2020 amid increasing threats to growth, the latest publication of the World Economic Outlook revealed.

The IMF statement said the Crown's fiscal position was strong and "provides space to accommodate the needs from strong economic and population growth", with increased spending on infrastructure able to be ramped up further if a bigger-than-expected tax take turned out to be structural. The growth was driven by an increase in prices - for example, the average cost of an iPhone rose from $618 in 2016 to $798 in 2017 - rather than in volume terms, as the number of smartphones sold fell for the first time on record previous year.

"Things continue at strong levels in 2018", he said. Two major economic reforms demonetisation and goods and services tax (GST) resulted in a slight lower growth rate of 6.7 per cent in 2017. The IMF says further cuts in interest rates are needed to bring price rises back towards that rate.

The IMF adjusted up the country's gross domestic product growth in January, with the revision in line with Seoul's growth outlook for 2018. This is the highest share of countries experiencing a year-over-year growth pickup since 2010.

The IMF has bailed out scores of countries over the years, including the United Kingdom in 1976 when the minority Labour government borrowed £2.3bn from the fund to stabilise the value of the pound; Iceland in 2008; and Greece in 2010, 2012 and 2015.

The global economy is still on an upswing, but the good times may not last beyond the next year or two.

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The report notes that the sweeping U.S. tax cuts approved in December will fuel higher growth only through next year, and after that will "subtract momentum".

That said, Mr Obstfeld describes longer-term prospects as "more sobering".

The IMF, whose members are drawn from 189 economies, can play an important role by offering advice and serving as a forum for discussion and collaboration in the development of a consistent regulatory approach, she said.

Assets tied to cryptocurrencies don't pose an immediate danger to the global financial system because their footprint is still small, and they have limited links to the rest of the financial system, although they have the potential to magnify the risks and increase the transmission of economic shocks, according to IMF's preliminary assessment.

However, Obstfeld warned the stimulus was "largely temporary". The acceleration is driven by faster growth in the euro area, Japan, China, and the United States, as well better performance in Brazil, Mexico and emerging Europe, and underpinned by growing trade and investment. Stronger U.S. demand will benefit most of the rest of the world, assuming Trump doesn't start a trade war.


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