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IMF Downgrades Global Economy

12 October 2018

That includes President Donald Trump's imposition of tariffs on US$250 billion in Chinese goods, as well as on aluminium, steel and other products worldwide.

"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".

China has responded in kind with its own barrage of levies, rattling nerves especially among other Asian economies and already vulnerable countries like Argentina, Turkey and Brazil. The IMF projections don't take into account Mr Trump's threat to expand the tariffs to effectively all of the more than US$500 billion in goods the U.S. bought from China a year ago.

He continued: "Trade policy reflects politics and politics remain unsettled in several countries, posing further risks".

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It's not just the world's two most powerful economies that stand to be affected by trade policy.

Dr Obstfeld also expects Indonesia to turn in "fairly strong" growth, despite the weakening rupiah.

The finance ministry did not specify how much in emergency financing the government would seek, but Umar earlier said the government would need at least $8 billion to cover its external debt payments through the end of the year.

On the other hand, the International Monetary Fund increased growth projections for the United States from 2.2 to 2.9 per cent.

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The IMF maintained its forecast that Asia's economy will expand by 5.6% this year but cut its projection for next year to 5.4%, down by 0.2 points from April.

The fund urged governments to focus on policies that could share the benefits of growth more widely, helping counter the growing mistrust of institutions and avoiding "protectionist reactions to structural change".

"Today's growth headwinds, from financial market tightening to trade tensions, could persist for some time", he told a briefing on the report. That could result in higher-than-expected interest rates from the Federal Reserve and stock market uncertainty. "The reason for this, according to Maurice Obstfeld, the IMF's chief economist is because, "(The) US growth will decline once parts of its fiscal stimulus go into reverse. "In Nigeria, inflation is projected to fall to 12.4% in 2018, from 16.5% in 2017, and to rise to 13.5% in 2019", the report read.

"Uncertainty over trade policy is prominent in the wake of United States actions (or threatened actions) on several fronts, the responses by its trading partners, and a general weakening of multilateral consultation on trade issues", the report said.

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"A further escalation of trade tensions, as well as rising geopolitical risks and policy uncertainty in major economies, could lead to a sudden deterioration in risk sentiment, triggering a broad-based correction in global capital markets and a sharp tightening of global financial conditions", the International Monetary Fund said.

IMF Downgrades Global Economy