The International Monetary Fund warned on Monday that global economic expansion has plateaued, increasing the risk of worse outcomes, although it also projected that the world will maintain a 3.9 percent growth rate in the next two years.
In an update of the World Economic Outlook report, the Fund said that the US, specifically, is vulnerable to risks of slowdown in exports amid the fees to be imposed in retaliation by trade partners.
"The risk that current trade tensions escalate further with adverse effects on confidence, asset prices and investment is the greatest near-term risk to global growth," IMF Chief Economist Maury Obstfeld told a news conference.
Our 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.
“For the advanced economies, we project 2018 growth of 2.4 percent, down 0.1 percentage point from our April World Economic Outlook projection. We maintain an unchanged forecast of 2.2 percent growth in those economies for 2019,” the IMF said in its latest report.
The euro zone’s 2018 growth forecast was cut to 2.2 percent from 2.4 percent, with Britain cut to 1.4 percent from 1.6 percent. Japan ’s growth projection was cut to 1.0 percent from 1.2 percent.
Japan, which is expected to witness a growth of 1 percent (0.2 points), reached slight consumption and investment in the first quarter. Japan’s economy will be reinforced in the remaining part of the year, added IMF.
Obstfeld said that conditions of BREXIT remain ambiguous despite months of negotiations (0.2 points to 1.4 percent). He added that the geopolitical tension and the halt of supplies contributed to the rise of oil prices. This had a positive impact on the exporting countries such as Russia or the oil countries in the Middle East, and negatively affected the importing countries such as India whose growth is estimated at 7.3 percent.
