The commercial war makes the IMF less optimistic for global growth

La guerre commerciale rend le FMI moins optimiste pour la croissance mondiale

WASHINGTON — The commercial war which raged between the United States and China is a shadow cast over the global economy, stressed on Monday the international monetary Fund in lowering the growth prospects for 2018 and 2019.

The IMF, which also points the finger at the risks around the currency crisis in some emerging countries, now expects growth of the global gross domestic product (GDP) of 3.7 % for each of these two years (- 0.2 point), an increase similar to that of 2017.

“Global economic growth is still strong compared to what it was earlier in this decade, but it seems to have peaked,” said Maurice Obstfeld, the chief economist of the IMF.

In addition, the risks are increased if they are not already “partially realized”.

The expansion is also less synchronized across countries, less savings involved, while the public debt and of the number of enterprises reached new records, observes the Fund, which holds its annual meetings this week in Bali, Indonesia.

Avoid protectionism

In the spring, the IMF spoke of these risks, citing in particular, the customs taxes that the administration Trump had proposed to impose on goods of its partners, including chinese.

Since then, Washington went from words to action : $ 250 billion of chinese imports are subject to tariffs additional. And Beijing has countered by imposing taxes on $ 110 billion of u.s. goods.

For the time being, the forecast of growth by 2018 in the United States and China, the two largest economies of the world, have been maintained, respectively + 2.9% and + 6.6% for : rhythms still very supported. For the United States the growth envisaged is above that of the advanced countries (+ 2.4 per cent). For China, it slightly exceeds that of the region developing Asia (+ 6.5 per cent).

But the IMF believes that the growth will slow down in 2019, 2.5% for the United States (- 0.2 %) and + 6,2 % (- 0.2 %) in China.

Ultimately, the growth of the two giants could falter even more, since these forecasts do not include the other threats from Donald Trump, whose new taxes on 267 billion dollars of chinese goods additional. This would overtax the entire chinese exports to the United States.

The american president and his chinese counterpart Xi Jinping have shown up so inflexible. Donald Trump justifies its offensive by the fact that he intends to get Beijing to change business practices it deems “unfair” (technology transfer-forced, dumping, the “theft” of intellectual property). The chinese administration does not negotiate with “a knife under the throat”.

“Avoid protectionist responses and find solutions, advocating cooperation to promote the growth of trade in goods and services remains essential to preserve and expand the expanding world”, insists the IMF.

The institution is particularly concerned about a renewed intensification of trade tensions that could create a little more uncertainty, eroding business confidence and financial markets, lead to more financial volatility and slow down finally the investment and trade have been the engine of global growth.

It has already revised downward the growth in the volume of world trade to 4.2 % this year (- 0.6 point) and to 4 % next year (- 0.5 point).

In total, global GDP could be reduced by 0.8 % by 2020, compared with the 0.5 % estimated in July.

Political risk

Elsewhere in the world, the Fund has also lowered the growth forecast of the euro area to 2 % this year (- 0.2 point), including Germany (+ 1.9 per cent – 0.3 percentage points) and France (+ 1,6 % – 0.2 of a point) whose exports are hampered by the economic slowdown in China.

It proves to be even more pessimistic for Latin America and the Caribbean whose GDP for 2018 is now expected to increase by 1.2 % (- 0.4 points).

In this part of the world, Venezuela is mired in recession and the resumption of expansion in Brazil, leading economic power in South America, will be much less strong than expected. Finally, Argentina, which was obtained from the IMF financial assistance of $ 57 billion, is not spared by the crisis of the currencies of some emerging countries.

The bad of these economies steps up to present a scenario that is more or less typical : the United States raise their interest rates. Countries heavily indebted in dollars will suffer. Investors turn to dollar investments become attractive. And the emerging currencies flanchent.

The IMF also notes the tensions on the political and diplomatic, which have contributed to the weakening of certain economies.

And to quote the recent problems in Italy to form a government, uncertainties still weigh the Brexit in Britain, the political tensions between the United States and Turkey, and even the re-imposition of u.s. sanctions on Iran.

No surprise that finally, the recent rise in the oil price benefits the exporting economies in sub-saharan Africa and the Middle East.

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