The International Monetary Fund (IMF) has projected 3.7 percent global economic growth for fiscal 2018-19, which is 0.2 percent lower than its previous forecast in April.
IMF released the new report in the Indonesian resort island of Bali today where the IMF and World Bank annual meetings are set to be held.
The report says momentum is still strong as fiscal stimulus continues to increase in the United States, but the forecast for 2019 has been revised down due to recently announced trade measures, including the tariff imposed on US$ 200 billion import of the US from China.
The downgrade reflects a confluence of factors, including the introduction of import tariff between the United States and China, weaker performances by eurozone countries, Britain and Japan, and rising interest rates that are pressuring some emerging markets with capital outflows, notably Argentina, Brazil, Turkey, South Africa, Indonesia and Mexico.
In a statement, IMF chief economist Maurice Obstfeld said: “Notwithstanding the present demand momentum, we have downgraded our 2019 US growth forecast owing to the recently enacted tariffs on a wide range of imports from China and China’s retaliation.”
“Last April, at the time of our last World Economic Outlook, the world economy’s broad-based momentum led us to project a 3.9 percent growth rate for both this year and next.”
Considering developments since then, however, Obstfeld said, that number now appears overoptimistic.
The IMF chief economist said: “China’s expected 2019 growth is also marked down. 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”.
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, he said.
Obstfeld said the negative revisions for emerging market and developing economies are more severe, at minus 0.2 and minus 0.4 percentage point respectively for this year and next year.