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IMF expects steady growth of the global economy but some risks loom

UNITED STATES (OBSERVATORY) –┬áThe world economy will grow steadily this year and next, driven by the United States and Europe in particular, but growth is likely to be affected by trade tension between the world’s two largest economies, the International Monetary Fund (IMF) said on Tuesday.

After rising to 3.8 percent in 2017, global gross domestic product (GDP) is expected to rise to 3.9 percent this year and next, unchanged from previous forecasts in January, according to the IMF’s semi-annual report on the global economy.

The fund, which holds spring meetings this week in Washington, has announced an increase in its forecast in October and January.

Nearly ten years into the global recession, the world economy is growing at a rapid pace, led by developed economies as well as emerging and developing countries.

For the year 2018, expectations for the United States rose by 2.9 percent, boosted by tax reforms, with 2.4 percent forecast for the euro area, especially Germany, France, Italy and Spain, as well as for Brazil (2.3 percent).

The International Monetary Fund also pointed to the strong performance of Japan and China with expectations of growth of 1.2% for the first and 6.6% for the second, and India will also contribute to global dynamics with 7.4%.

“The global economy continues to show great momentum,” said IMF chief economist Maurice Obstfeld. “But behind this positive picture is the prospect of a trade dispute looming.”

– undermining confidence? –

Since March, the United States has stepped up its protectionist measures. After imposing a 25% tax on steel imports and 10% on aluminum imports and announced their intention to respond to China to compensate for “unfair” business practices.

Washington accuses Beijing of “forcibly transferring US technology” and “stealing intellectual property.”

The Asian giant quickly responded by announcing measures against major US imports, prompting US President Donald Trump to bid by threatening to target $ 150 billion of Chinese imports.

But the measures have not yet been implemented.

But Obstfeld said protectionism involves “undermining confidence” and “disrupting global growth prematurely.”

The specter of commercial warfare has already led to large swings in global financial markets, especially Wall Street.

“There is a contradiction between the fact that major economies risk a trade war and coincide with economic expansion,” he said, while growth is closely linked to investment and trade.

The volume of trade in goods and services worldwide is expected to increase by 5.1 percent this year after registering 4.9 percent last year.

In the short term, the risk of growth remains somewhat limited by the International Monetary Fund, which points to a series of long-term threats.

“Developed economies face aging populations, low labor market participation and poor productivity growth,” he said.

He stressed the need for commodity exporters to diversify their economies if they wanted to further expand their scope and their ability to adapt in the event of a crisis.

The importance of geopolitical risks should not be underestimated, according to the International Monetary Fund.

IMF chief executive Christine Lagarde said last week that “the picture is bright now, but you can see dark clouds on the horizon.”

However, she said, “The best way to deal with economic imbalances is not by imposing customs duties, but by adopting policies that affect the economy as a whole, such as budget tools or structural reforms.”