• 09-OCT-2018

IMF WEO Global Growth

The IMF World Economic Outlook sees a slow-down in global growth environment with growing risks of recession on the horizon, Research Department Director Maury Obstfeld told reporters in Bali, Indonesia Tuesday (October 9).
 
“We are now projecting growth at 3.7% for this year and for next year. Now that is .2 percentage points down from what we thought in our last projections, though it is still the same level we saw in 2017 – fairly solid, but growth has plateaued,” Obstfeld said.
 
Some of that risk comes from the ramping up of the threats of trade sanctions, while there is also pressure on emerging markets from a strengthening US Dollar and rising interest rates, Obstfeld said.
 
“(Growth has) also become less even, and there are also greater risks of negative developments on growth. We are finally seeing the trade tensions kick in with the latest US actions on China and retaliation which have led us to downgrade our growth projections for China next year, and also for the US,” he said.
 
Countries should take steps now to prepare for tougher times ahead, the annual report on the world’s economy urged.
 
The IMF recommends that countries take advantage of the current buoyant economic situation to shore up their fiscal positions and prepare for the next downturn, whenever that inevitably hits.
 
“Risks on the horizon make it even more important to undertake policy reforms, that strengthen growth and make it more resilient, that rebuild fiscal buffers and that strengthen regulatory frameworks because the next recession will come someday. It may be sooner than we think.,” warned Obstfeld.
 
Policies should be developed and put in place to reduce inequality and to deal with the rise of automation and artificial intelligence, the WEO finds.
 
“We also need to pay attention to longer run problems such as the stagnation of wages and how labor markets will respond to new technologies based on artificial intelligence,” Obstfeld said.
 
So-called ‘inward looking’ policies such as imposing tariffs and import quotas on trade also risk impacting growth negatively. Obstfeld reinforced IMF Managing Director Christine Lagarde speech last week, saying that the WTO and international trade regulations need to be fixed, not scrapped.
 
“Finally, the multilateral system of cooperation that has given us seventy years of prosperity is under threat and needs reform. We need to strengthen it.”
 
A full copy of the report including data on specific countries and regions may be found at IMF.org/WEO

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