UNITED STATES (OBSERVATORY) – Global growth will remain stable this year and next year, buoyed by strong trade and fiscal stimulus in the United States, that will fade in the early next decade, while the increase in tariffs is expected to hurt market confidence and production, the International Monetary Fund said on Tuesday.
The IMF, in its latest World Economic Outlook, kept its global growth forecast for 2018 and 2019 unchanged at 3.9 percent each, after a revised forecast in January.
The fund released forecasts as thousands of global financial officials gathered in Washington for the Spring Meetings of the IMF and the World Bank this week.
The IMF said it raised its growth forecast in the United States by 0.2 percentage points for both years to 2.9 percent in 2018 and 2.7 percent in 2019. He added that tax cuts on US companies and accelerated investment by temporary tax breaks would support growth in the United States by 2020, These effects will quickly fade, causing a slowdown.
“Global growth is expected to slow down after the next two years,” the IMF said in the report, adding that developed economies would be affected by the aging population and poor productivity.
The increase in demand for exports has raised expectations for growth in the euro zone and Britain for 2018, while keeping its outlook unchanged for Japan, China, India, Russia and Mexico, the IMF said.
The fund has slightly reduced its growth prospects in Canada, the Middle East and North Africa and a number of low-income developing countries.
The prospects for per capita income growth in developing economies would be difficult over the next five years, particularly in commodity-exporting countries in the Middle East, sub-Saharan Africa, Latin America and the Caribbean.
“The prospect of trade restrictions and counterbalance threatens to undermine confidence and a rapid hurdle to growth,” IMF chief economist Maurice Obstfeld told a news conference ahead of IMF and World Bank meetings this week, as trade is expected to dominate discussions.
In response to a question about whether there was a trade war going on, Opstfield said the United States and China had launched “some warning shots” in tariff plans but had not yet done so.
“I think there is still room for States to conduct further multilateral discussions with a view to making use of existing mechanisms to resolve conflicts and avoid any escalation,” he said.
Mr Oppsfeld said US President Donald Trump’s trade initiatives would do little to reduce the US trade deficit and the US current account deficit, because it was tied to US spending that was above income.