International Monetary Fund warns trade friction to hurt Asian growth

Saul Bowman
October 12, 2018

In July, the International Monetary Fund, in its World Economic Outlook report, projected Nigeria's economy to grow by 2.1 per cent in 2018 and 2.3 per cent in 2019.

"Last April, the world economy's broad-based momentum led us to project a 3.9 per cent growth rate for both this year and next".

The ongoing trade war between the USA and China could start having material effects on the economies of both countries within the coming years, according to new projections from the International Monetary Fund (IMF).

The International Monetary Fund (IMF) has warned an escalation in trade tensions between the U.S. and China could lead to a global financial crisis.

The prime minister's directive came on a day when Pakistan's Finance Minister Asad Umar met with IMF Managing Director Christine Lagarde in Nusa Dua, Indonesia and formally sought a bailout from the global lender.

Although the newly projected rate is same as last year's rate of 3.7 percent, this growth exceeds that achieved in any of the years between 2012 and 2016, and it occurs as many economies have reached or are nearing full employment and as earlier deflationary fears have dissipated.

International Monetary Fund senior economist Harald Finger, who led the visit, said the problems mostly stemmed from an overvalued exchange rate and excessively easy credit.

China's growth is still expected to be more than 6% next year, but the IMF's chief economist Maurice Obstfeld warned Beijing to concentrate on quality and sustainability of growth, not quantity of growth.

The IMF projects average annual inflation will pick up to 2.8 percent in 2018 and to 3.3 percent in 2019, climbing over the National Bank of Hungary's 3.0 percent mid-term target. South Africa, only 0.8 per cent this year; Angola, contracting by 0.1 per cent this year. It believes the Australian economy will expand by 2.8 per cent next year.

Trade tensions are expected to continue although Fund officials view US-Mexico-Canada trade agreement as a positive sign. "In Nigeria, inflation is projected to fall to 12.4 percent in 2018, from 16.5 percent in 2017, and to rise to 13.5 percent in 2019", the report read.

The yuan currency has faced strong selling pressure this year, losing over 8 percent between March and August at the height of market worries, though it has since pared losses as authorities stepped up support.

For the eurozone, slow growth means less reductions in high unemployment rates in several countries and difficulty keeping on top of high debt levels, while Japan needs growth to ward off unsafe deflation.

Among emerging market and developing economies, the growth prospects of many energy exporters have been lifted by higher oil prices, but growth was revised down for Argentina, Brazil, Iran, and Turkey.

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