International Monetary Fund lowers China 2019 growth forecast, citing trade war

Finance Minister Asad Umar says decision is taken after consulting leading economists

Finance Minister Asad Umar says decision is taken after consulting leading economists

The worldwide organisation said that India's growth has rebounded from "transitory shocks" such as the demonetisation of high value currency notes and the introduction of the Goods and Services Tax.

According to experts, such inclination in the USA dollar rate against Pakistani rupee is an impact of government's decision to approach the International Monetary Fund (IMF) in order to handle the financial crisis that Pakistan is facing.

Meanwhile, rising interest rates are also pressuring some emerging markets with capital outflows, notably Argentina, Brazil, Turkey and South Africa.

The new forecasts were released on the Indonesian resort island of Bali where the International Monetary Fund and World Bank annual meetings are getting underway.

The IMF has been recommending that Chinese authorities de-emphasize the quantity of growth to focus more on its quality and sustainability to allow the economy to better withstand shocks, Obstfeld said. China was the fastest growing economy in 2017 as it was ahead of India by 0.2 percentage points. In several key economies, moreover, growth is being supported by policies that seem unsustainable over the long term.

"Last April, the world economy's broad-based momentum led us to project a 3.9 per cent growth rate for both this year and next". 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.

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The IMF predicted United Kingdom growth to would be 1.4% in 2018, rising to 1.5% in 2019, while the eurozone 2018 growth forecast was cut to 2.0% from 2.2%.

The euro zone's 2018 growth forecast was cut to 2% from 2.2% previously, with Germany particularly hard hit by a drop in manufacturing orders and trade volumes.

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.

Maurice Obstfeld said the International Monetary Fund does not see a generalised pullback from emerging markets, nor contagion that will spill over to those emerging economies which have stronger economies and have thus far avoided major outflows, such as those in Asia and some oil exporting countries.

According to the World Economic Outlook, in India, reform priorities include reviving bank credit and enhancing the efficiency of credit provision by accelerating the cleanup of bank and corporate balance sheets and improving the governance of public sector banks.

Noting that growth in the United States, buoyed by a procyclical fiscal package, continues at a robust pace and is driving USA interest rates higher, Obstfeld said U.S. growth will decline once parts of its fiscal stimulus go into reverse. The report said that aggregate growth in the emerging market and developing economy group stabilised in the first half of 2018.

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