International Monetary Fund cuts global growth forecast for 2018, 2019

International Monetary Fund cuts global growth forecast for 2018, 2019

International Monetary Fund cuts global growth forecast for 2018, 2019

The IMF warned that the world faced a permanent hit to growth if the U.S. followed through on a threat to impose a 25% on all imported cars, and global tariffs hit business confidence, investment and borrowing costs.

The IMF expects a 2.9 percent growth outlook on the United States economy, but thinks growth will shrink to 2.5 percent for 2019, attributing to the slowdown to the country's escalating trade war with China.

In addition, the International Monetary Fund estimates that the unemployment rate will fall by 1.6% this year from 2017 (21.5%) to 19.9% %, while in 2019 it estimates that the percentage will fall further to 18.1%.

It said the global economy will grow 3.7 percent this year, the same as in 2017 but down from the 3.9 percent it was forecasting for 2018 in July. China's 2019 growth forecast was reduced to 6.2 percent from 6.4 percent; the USA growth outlook was cut to 2.5 percent from 2.7 percent.

The IMF warned of a permanent hit to growth if the USA goes ahead with a threat to impose a 25 percent tariff on all imported cars.

"Overall, compared with six months ago, projected 2018-2019 growth in advanced economies is 0.1 percentage point lower, including downgrades for the euro area, the United Kingdom, and Korea".

Maurice Obstfeld, the IMF's chief economist, said at a media briefing about the fund's latest World Economic Outlook: "When you have the world's two largest economies at odds, that's a situation where everyone suffers".

The Federal Reserve, the US central bank, has raised short-term USA rates three times this year as the American economy gains strength more than nine years after the end of the Great Recession.

In several key economies, moreover, growth is being supported by policies that seem unsustainable over the long term.

Among major middle-income countries in sub-Saharan Africa, SA has the lowest projected growth rate for 2018, according to the International Monetary Fund, after Cameroon and Zambia, both projected to grow at 3.8% in 2018. "Domestic Chinese policies are likely to prevent an even larger growth decline than the one we project, but at the cost of prolonging internal financial imbalances", the global financial body said.

Monday's announcement sparked a devaluation of the rupee with the currency trading at 134 for a dollar at the official rate, against 124 the day before.

When the world's two biggest economies - the USA and China - are "at odds", that is going to create "a situation where everyone is going to suffer", Obstfeld said. Tighter financial conditions in advanced economies also could cause disruptive portfolio adjustments, sharp exchange rate movements, and further reductions in capital inflow to emerging markets with weaker fundamentals and higher political risk, it added.

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