International Monetary Fund says global economy will slow after 2019 on escalating trade tensions

Posted April 18, 2018

The International Monetary Fund (IMF) has maintained its forecast for India's economic growth at 7.4% in 2018-19, which will again make the country the fastest-growing large economy after losing this tag to China by a close margin in 2017-18.

The global body of 189 member countries, set up to foster worldwide monetary cooperation, says New Zealand is enjoying a "solid economic expansion" in the concluding statement of its regular "Article IV mission review", with growth set to remain near or above potential.

The IMF kept its 2018 and 2019 global growth forecasts unchanged at 3.9 percent for both years after upgrades in January.

The IMF said, two-thirds of countries accounting for about three-fourths of global output experienced faster growth in 2017 than in the previous year.

Although it's hard to fully assess the impact the signal the ban is sending to foreign investors, he says it "would be one thing for the Government to worry about".

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This revision in the forecast is still far below the envisioned 5% economic growth rate by the National Development Plan (NDP), to lower unemployment to 14% by 2020.

Some central banks and governments are trying to get ahead of the curve.

That said, Mr Obstfeld describes longer-term prospects as "more sobering".

The report notes that the sweeping USA tax cuts approved in December will fuel higher growth only through next year, and after that will "subtract momentum". Mr. Trump's pulling out of the 11-country Comprehensive and Progressive Agreement for Trans-Pacific Partnership is unhealthy for the global economy, they said.

The International Monetary Fund has said the tax cuts introduced by the Trump administration will give a temporary boost to the U.S. economy, but the tax reform effects will wear off in two years time.

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Compared to the January WEO report, the forecasts for the economy growth of the CIS member countries remained unchanged.

International Monetary Fund economist Dirk Muir said the New Zealand government is also weighing up where there has been underinvestment in infrastructure and that there are ways around that, such as shifting spending into public transport to address a problem like traffic congestion, as opposed to building a new road.

House attributes the rosier USA outlook to federal tax cuts, a massive US$300-billion spending package and the possibility of an additional spending or infrastructure bill. Stronger U.S. demand will benefit most of the rest of the world, assuming Trump doesn't start a trade war.

Trade uncertainty, rising interest rates and measures to cool the Toronto and Vancouver housing markets have also contributed to the slower Canadian growth projection, he said.

However, Obstfeld warned the stimulus was "largely temporary".

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