IMF: Global Expansion still strong but less even - Global Trade Magazine
  September 16th, 2018 | Written by

IMF: Global Expansion still strong but less even

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Sharelines

  • IMF: Trade tensions and protectionist policies are on track to derail global economic growth.
  • Trade wars could reduce global output by around 0.5 percent—$400 billion—by 2020.
  • IMF report judges that the risk of worse economic outcomes has increased.

Rising tensions over international trade is jeopardizing the broad global economic expansion that began roughly two years. According to a report from the International Monetary Fund, the global economy has plateaued and become less balanced.

In the IMF’s latest World Economic Outlook Update, the organization continues to project global growth rates a t a healthy 3.9 percent for 2018 and 2019. The problem is that “the risk of worse outcomes has increased.”

In advanced economies, growth remains generally strong but it has slowed in places like Japan, the United Kingdom, and the eurozone. The United States economy continues to grow robustly and job creation is up, but the IMF projects that US growth will decelerate over the next few years, as the long recovery and the effects of fiscal stimulus wane. The IMF projects 2018 growth of 2.4 percent for advanced economies and 2.2 percent growth for 2019.

Emerging and developing economies are projected to grow at a 4.9-percent clip this year and 5.1 percent next year. “These aggregate numbers,” the report warned, “conceal diverse changes in individual country assessments.”

China continues to grow in line with the IMF’s earlier projections but some large economies in Latin America, Europe, and Asia are projected to grow slower than in the IMF’s April forecasts. “Supply disruptions and geopolitical tensions have helped raise oil prices,” the report noted, “benefiting emerging oil exporters (for example, Russia and Middle Eastern suppliers) but harming importers (for example, India).”

Per capita incomes in many countries in sub-Saharan Africa will rise but growth will fall short of the levels seen during the 2000s.

The risk of escalation of current trade tensions “is the greatest near-term threat to global growth,” according to the report. IMF “modeling suggests that if current trade policy threats are realized and business confidence falls as a result, global output could be about 0.5 percent below current projections by 2020. As the focus of global retaliation, the United States finds a relatively high share of its exports taxed in global markets in such a broader trade conflict, and it is therefore especially vulnerable.”