International Monetary Fund warns of broad ‘market correction’ from global trade tensions

Cornelia Mascio
Ottobre 11, 2018

Iran's economy is expected to shrink by 1.5 percent in 2018 and by another 3.6 percent in 2019, the International Monetary Fund (IMF) said in the October update of its World Economic Outlook, heavily downgrading the Islamic Republic's growth prospects with the return of the US sanctions. But the fund lowered China's economic outlook for 2019 to 6.2 per cent, which would be the country's slowest growth since 1990.

The IMF expects growth in Russian Federation at 1.7 percent this year and 1.8 percent next year, it said in an update to its World Economic Outlook on Tuesday.

This acceleration reflected a rebound from transitory shocks (demonetisation and implementation of the GST), with strengthening investment and robust private consumption, it said.

A currency trader counts Pakistani Rupee notes as he prepares an exchange of U.S dollars in Islamabad, Pakistan December 11, 2017.

In its report the International Monetary Fund said the tit-for-tat tariffs imposed by the United States and China, weaker performances by eurozone countries, Japan and Britain all conspired to increase pressure on the global economy, while "the possible failure of Brexit negotiations poses another risk".

"India's medium-term growth prospects remain strong at 7.75 per cent, benefiting from ongoing structural reform", it added.

As part of its new Global Financial Stability Report, the International Monetary Fund said on Wednesday that financial institutions to "step up their preparations for a post-Brexit landscape" and prepare for the worst case scenario - a no-deal Brexit, also known as a hard Brexit. Australia's S&P/ASX 200 gave up 1.0 per cent to 6,041.10. Real GDP growth was recorded at 2.6 percent in 2010, 3.6 percent in 2011, 3.8 percent in 2012, 3.7 percent in 2013, 4.1 percent each in 2014 and 2015, 4.6 percent in 2016 and 5.4 percent in 2017.

Also on Tuesday, it projected that inflation in Nigeria would increase to 13.5 per cent next year.

The report analysed China's public balance sheet and found that its general government net financial worth has deteriorated in recent years to about 8 per cent of GDP, largely because of subnational borrowing and underperforming public corporations.

Since the last GFSR in April, global economic conditions have become less balanced, with a more pronounced divergence between advanced and emerging economies.

The US-based organisation says that a "no-deal" departure from the European Union could lead to fragmentation in European money markets, meaning that finance cannot flow around the system so efficiently.

It also said inflation in India is on the rise, estimated at 3.6 per cent in fiscal year 2017/18 and projected at 4.7 per cent in fiscal year 2018/19, compared with 4.5 per cent in fiscal year 2016/17, amid accelerating demand and rising fuel prices.

If pressures on emerging market economies were to broaden and intensify, financial stability risks would increase significantly, he said.

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