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

Remigio Civitarese
Ottobre 11, 2018

"Notwithstanding the present demand momentum, we have downgraded our 2019 U.S. growth forecast owing to the recently enacted tariffs on a wide range of imports from China and China's retaliation".

Regulatory tightening has slowed the buildup of risks in China's financial sector and made it harder for weaker borrowers to obtain credit, the International Monetary Fund said in its semiannual "Global Financial Stability Report", pointing to a surge in corporate bond defaults in 2017 and 2018.

The global finance agency dropped its projection for world economic growth by two-tenths of a percentage point for both 2018 and 2019 to 3.7 percent, the first time it had trimmed its economic outlook in more than two years.

Last month, the Swiss government, raised its GDP forecast for 2018 to 2.9% from 2.4% and, earlier this year, it was announced that Swiss exports had matched and surpassed their recent growth.

With much of the U.S.

The IMF-World Bank meeting is an annual summit to discuss global financial and economic issues, including global economic outlook, poverty eradication, and aid effectiveness.

That puts pressure on emerging market economies such as Turkey and Argentina, which have large amounts of debt which concerns investors.

The 0.2 percentage point downgrade to the 2019 growth forecast is attributable to the negative effect of recent tariff actions, assumed to be partially offset by policy stimulus, it said.

Speaking today at the International Monetary Fund and World Bank annual meetings in Bali, Indonesia, Ms Lagarde said: "The real question is: Is the economy strong enough?"

It predicted 2.9 percent USA growth this year, dropping to 2.5 percent next year, and to 1.8 percent in 2020, as the effect of US tax cuts wears off and the trade war with China inhibits growth.

According to the IMF, Japan's growth is projected to soften to 0.9 percent in 2019, unchanged from the July estimate.

The Group of 24 (G-24), a chapter of the G-77, was established in 1971 to coordinate the positions of developing countries on global monetary and development finance issues and to ensure that their interests were adequately represented in negotiations on worldwide monetary matters.

"Where we are now is we've gotten some bad news".

The IMF notes that credit conditions in emerging markets have tightened since mid-April, driven by a stronger US dollar, escalating trade tensions, and political and policy risks unique to individual countries.

China's involvement in Pakistan's economy could bring both benefits and risks, Maurice Obstfeld said.

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

That initiative includes China, India and Japan, but not the United States.

The tariffs stem from the Trump administration's demands that China make sweeping changes to its intellectual property practices. It also assumes that Trump imposes a 25 percent tariff on imported cars and auto parts.

Beijing has answered with taxes on $110 billion worth of USA exports.

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