Don't rock the boat, IMF warns policymakers on trade

Cornelia Mascio
Aprile 15, 2019

Chen made the statement at the ministerial meeting of the 39th meeting of the International Monetary and Financial Committee (IMFC), the policy-setting body of the International Monetary Fund (IMF).

"While we expect to see a pickup (in growth) next year, trade tensions, geopolitical risks, political instability are among the challenges", Lesetja Kganyago, the committee's chairman and the South African Reserve Bank's governor, said at a press conference after the panel adjourned its semi-annual meeting.

"Against this backdrop, we agree that countries need to generate fiscal space, enhance resilience including to climate change, and create sustained high and inclusive growth, including by removing obstacles to greater gender equity".

In a statement to the International Monetary Fund (IMF), Chen said Mainland China's economy is "generally stable".

The IMF on Tuesday lowered its global growth forecast for 2019 to 3.3 percent in its latest World Economic Outlook (WEO) report, down 0.2 percentage point from its estimation in January, signaling a broad-based slowdown.

Coinciding with the institutions' meetings was a gathering of world financial leaders and central banks, who said the global economy was likely to pull out of a brief slump later this year. Japan holds the chairmanship of the Group of 20 major economies. That has eased the pressures that global financial markets felt at the end of 2018, which contributed to the unwanted tightening of financial conditions partly blamed for the economic weakening.

Beijing will use fiscal policy tools to support economic growth this year, Chen added.

There is some cause for optimism.

Protectionism has harmed mutual trust among countries and limited the scope for multilateral cooperation, a vice governor of China's central bank said on Saturday, taking a swipe at the Trump administration's "America First" trade policies.

But he also warned that factors that undermine confidence, including the risk of a hard Brexit and a global trade war, continue to "loom large", putting growth at risk.

Even if they do come to an agreement, a trade deal between the world's two biggest economies could have unintended consequences if China commits to purchases of USA goods that crowds out imports from other countries in Asia, Changyong Rhee, head of the IMF's Asia-Pacific department said on Friday. They are battling over USA allegations that China deploys predatory tactics - including cybertheft and forcing foreign firms to hand over trade secrets - in a sharp-elbowed effort to challenge American technological dominance.

In remarks to the World Bank's steering committee on Saturday, Mnuchin said the USA was encouraged that the bank's private sector lending operation wanted to step up support for nations "affected by fragility, conflict and violence".

Separately, Treasury Secretary Steven Mnuchin told reporters that both the United States and China were moving closer to an agreement on trade.

"I don't see an alternative to a multilateral work", she said, noting that many important issues, such as trade, climate change, cyber security and worldwide taxation, all require that countries cooperate and come up with joint solutions.

"The prolonging of trade tensions and policy uncertainties pose a serious risk to the global economy by undermining private investment, disrupting global supply chains and weakening productivity growth", Aso said.

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