UNITED STATES (OBSERVATORY) – The International Monetary Fund (IMF) on Tuesday kept its forecast of global economic growth at 3.9 percent in 2018 and 2019 in the face of growing risks such as trade tension between the world’s two largest economies.
After rising to 3.8 percent in 2017, global 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.
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 2.9 percent, boosted by tax reforms, 2.4 percent 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.
“The global economy continues to show great momentum,” said IMF chief economist Maurice Obstfeld. “But behind this positive picture, the prospect of a trade dispute looms.”
Since March, the United States has stepped up its protectionist measures. After taxing 25% 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.
But the measures have not yet been implemented.
But Obstfeld said protectionism involves “undermining confidence” and “disrupting global growth prematurely.”
“There is a contradiction between the fact that major economies risk a trade war and coincide with economic expansion,” 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 want to further expand their scope and their ability to adapt in the event of a crisis.
Nor should geopolitical risks be underestimated, according to the International Monetary Fund.