IMF Warns That Trump’s Trade War Is Devastating The World Economy

Charlene Craig
October 13, 2018

The IMF had in its World Economic Outlook report in July projected that Nigeria's economy would grow by 2.1 per cent in 2018 and 2.3 per cent in 2019.

China's economy could also take a hit: The IMF revised its forecast for economic growth in 2019 down to 6.2 percent, slightly lower than previous estimates and down from 6.6 percent this year.

The three major economies of Africa: Nigeria, South Africa and Angola are projected to witness sluggish growth in 2019 and beyond, the International Monetary Fund (IMF) has said.

Prime Minister Imran Khan, who took office nearly two months ago, had been exploring alternatives, including a US$2 billion loan from China, to avoid a second International Monetary Fund bailout in five years.

"Notwithstanding the present demand momentum, we have downgraded our 2019 U.S. growth forecast owing to the recently enacted tariffs on a wide range of imports from China and China's retaliation".

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The IMF is expected to meet this week in Bali, Indonesia for its annual meetings with trade wars and the Federal Reserve's tightening monetary policy being main topics of discussion.

Nigeria's economy recorded slow growth in the second quarter of 2018 as oil sector contracted by 3.95%.

The IMF warned of a permanent hit to growth if the USA goes ahead with a threat to impose a 25 percent tariff on all imported cars.

Trump renewed his threat to impose tariffs on $267 billion worth of additional Chinese imports if Beijing retaliates further with its own higher levies on US products entering China.

Lagarde said she remained optimistic that disputes between nations could be ironed out, citing the Trump administration's recent successful renegotiation of the NAFTA agreement between the US, Canada and Mexico.

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In a report released ahead of the IMF's annual conference, this year held on the Indonesian island of Bali, the fund said that the UK's "pace of fiscal consolidation can be eased if risks materialize and growth slows sharply," an outcome likely in the event of a no-deal Brexit.

The US growth forecast for 2019 is down from 2.7% to 2.5%.

But the United States tax cuts and rising spending that have boosted growth, helping compensate for the impact of the growing trade conflict, could spark a sudden "inflation surprise", and in turn lead to faster-than-expected rise in U.S. interest rates, according to the fund.

Fed rate hikes are already increasing pressure on emerging market economies by fueling an outflow of capital as investors seek higher returns.

Brazil will see a 0.4 percentage-point drop in GDP growth to 1.4 per cent for 2018 as a nationwide truckers strike paralyzed much of the economy.

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The IMF staff team stressed the need for a decisive policy action on further exchange flexibility and tightening of fiscal and monetary policies along with structural reforms and "further increase in gas and power tariffs" to address the hard economic situation Pakistan is facing, with high fiscal and current account deficits and low foreign exchange reserves.

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