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NUSA DUA, Indonesia (Reuters) – The International Monetary Fund on Tuesday lowered its global economic growth forecast for 2018 and 2019, saying trade policy tensions and the imposition of tariffs at the end of the year are likely to be more important. imports weighed heavily on trade, while emerging markets faced harsher financial conditions and capital outflows.
On October 1, 2018, a cargo ship is seen behind containers in an automated container terminal located in Qingdao Port, Shandong Province, China. REUTERS / Stringer
The new forecast, published on the Indonesian resort of Bali, where annual meetings of the IMF and the World Bank are held, shows that a wave of strong growth, fueled in part by the US tax cuts and the rise in demand for imports, was beginning to weaken.
The IMF announced in an update of its Global Economic Outlook that it now forecast global growth of 3.7 percent in 2018 and 2019, down from its forecast of 3.9 percent. % in July.
The deterioration of the rating reflects a convergence of factors, including the introduction of import tariffs between the United States and China, the decline in the performance of the euro area countries, Japan and Great Britain. Brittany, and rising interest rates in some emerging markets with capital outflows, including Argentina, Brazil Turkey and South Africa.
"US growth will decline once some fiscal stimulus measures have been reversed," said IMF chief economist Maurice Obstfeld in a statement. "Despite the current momentum of demand, we have lowered our forecast for 2019 growth in the United States because of recently adopted tariffs on a wide range of imports from China and retaliatory measures taken by the United States. China."
While the impact of the tariff war between the United States and China was expected to be felt next year, the Fund has reduced its growth forecast for the United States in 2019 from 2.7% to 2.5%. %, while that of China in 2019 went from 6.4% to 6.2%. He left growth forecasts for 2018 for both countries unchanged at 2.9% for the United States and 6.6% for China.
The growth forecast for the euro area in 2018 has been reduced from 2.2% to 2.0%, with Germany being particularly affected by the decline in manufacturing orders and the volume of trade.
Obstfeld said that the IMF did not see a general decline in emerging markets, nor a contagion that would affect emerging economies that have stronger economies and have so far avoided massive outflows, such as those in Africa. 39, Asia and some oil exporting countries.
"But there can be no denying that vulnerability to major global shocks has increased," Obstfeld said. "Any sudden turnaround for emerging markets would pose a significant threat to advanced economies."
Brazil will witness a 0.4 percentage point decline in GDP growth, which will rise to 1.4% in 2018, with a national truckers' strike paralyzing much of the economy. Iran, faced with a new round of US sanctions next month, has also seen its growth forecasts reduced, the IMF said.
Some energy-rich emerging countries have been more resilient to higher oil prices. Saudi Arabia and Russia foresaw improvements.
The IMF said the balance of risks is now declining, with an increased likelihood that financial conditions will tighten as interest rates return to normal, which will further affect emerging markets as growth in emerging markets increases. demand from the United States will begin to slow down.
Trade tensions are expected to persist even though the Fund's officials perceive the trade agreement between the United States, Mexico and Canada as a positive sign.
"We are now getting bad news. Our likelihood that we were attaching to other bad news has increased, "said Obstfeld.
RISKS OF COMMERCIAL WAR
In a new simulation exercise to show the risks of a trade war for the global economy, the IMF modeled the effect of a total trade war between the United States and China, coupled with a global tariff threat over the world. motor vehicles and retaliation from trading partners. The model also includes the effects of a reduction in business confidence, which reduces investment and leads to a tightening of financial conditions.
Under this scenario, global GDP output would fall by more than 0.8% in 2020 and remain 0.4% below long-term levels compared to levels that do not produce these effects, which "entails significant costs for the economy". 39, world economy, especially by its impact ". on trust and financial conditions. "
The effects on the United States and China would be particularly severe, with losses of over 0.9% of GDP in 2019 in the United States and 1.6% in China in 2019.
The exercise assumes that US President Donald Trump is imposing tariffs on the remaining $ 267 billion in imports of Chinese goods not subject to punitive tariffs and that China is retaliating legitimately. It also assumes that Trump imposes a 25% tariff on imports of imported cars and parts.
The model shows that adjustments would occur as domestic production displaces higher-priced imports, but in the long run, US GDP would still be 1% below the baseline without these tariffs, while China's GDP would be one-half percent lower than the reference level.
Report by David Lawder; edited by Clive McKeef
