International Monetary Fund warns Trump trade war could cost global economy US$430 billion


The economy was projected to grow 7.8 per cent by 2019-20 by the Fund earlier, but now the projection stood at 7.5 per cent, according to the World Economic Outlook (WEO) Update, released on Monday.

"Its growth is set to increase from 0.8 percent in 2017 to 2.1 percent in 2018 and 2.3 percent in 2019 (0.4 percentage point higher than in the April WEO for 2019) on the back of an improved outlook for oil prices".

"India's growth remains quite robust into the future".

Although the global recovery is in its second year, growth has "plateaued" and become less balanced, and "the risk of worse outcomes has increased", Obstfeld told reporters, and in fact the forecast for this year was revised downward, but was rounded up to 3.9 percent.

The Update kept the growth projections for China unchanged at 6.6 per cent for this year and 6.4 for 2019, and for the U.S. at 2.9 per cent for 2018 and 2.7 per cent next year.

Delivering a sharp rebuke for US President Donald Trump, the Washington-based organisation said that the current threats made by the US and its trading partners risked lowering global growth by as much as 0.5 per cent by 2020, or about US$430 billion in lost GDP worldwide. The rates for most emerging economies, including Argentina and Brazil, have been revised.

However, the report said that without steps to "ensure the benefits are shared by all, disenchantment with existing economic arrangements could well fuel further support for growth-detracting inward-looking policies".

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The Japanese economy is forecast to cool to 1 per cent, marking the slowest growth rate among advanced nations - a downgrade of 0.2 per cent - following weak private consumption and investment in the first quarter of the year.

France, Germany and Italy will experience the biggest economic slowdowns of all major economies over the next two years, the International Monetary Fund warned yesterday. Alongside the threat of greater trade disputes, Obstfeld said: "Financial markets seem broadly complacent in the face of these contingencies". Both factors highlighted in the report apply to Pakistan.

The RBI will now come up with its monetary policy in August amid a five-month-high consumer price index inflation rate at 5 per cent and more than a four-year high wholesale price index inflation rate at 5.77 per cent in June.

The Washington-based International Monetary Fund said on Monday that the United States could be the "focus of global retaliation" to Trump's trade war and said the country is "especially vulnerable" to repercussions from an increase in tariffs.

"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".

The report noted that political uncertainty had risen in Europe since April and the European Union faced fundamental political challenges regarding migration policy, fiscal governance, norms concerning the rule of law, and the euro area institutional architecture.