IMF maintains world growth forecast, warns of potential trade conflict
The International Monetary Fund (IMF) on Tuesday kept its growth forecasts for the world economy unchanged for this year and next year, but warned that a potential broad-based trade conflict threatens to prematurely derail global growth.
In its newly-released World Economic Outlook, the IMF said the global economy would grow 3.9 percent in 2018 and 2019, unchanged from its previous forecast in January.
That forecast has been borne out by continuing strong performance in the euro area, Japan, China and the United States, all of which grew above expectations last year, according to the IMF.
It also projected near-term improvements for several other emerging markets and developing economies including some recovery in commodity exporters. It says the accelerations in investment and trade will continue to power the world economy’s upswing.
Maurice Obstfeld, economic counselor and director of research at the IMF, said in a press conference in Washington D.C. that the world economy continues to show broad-based momentum, but the prospect of a similarly broad-based conflict over trade presents a jarring picture.
He said the recent intensification of trade intense started in early March with the United States’ announcement of its intent to levy steel and aluminum tariffs for national security reasons.
While the United States has engaged in several bilateral negotiations to reduce U.S. trade deficits with individual trading partners, Obstfeld believes these initiatives will do little to change the overall U.S. external current account deficit.
The overall U.S. external current account deficit “owes primarily to a level of aggregate U.S. spending that continues to exceed total income,” he said.
Obstfeld called for a “dependable and fair dispute resolution” within a strong rule-based multilateral framework to address intellectual property concerns and other “inequitable trade practices”, adding that global interdependence will only continue to grow and unless countries face it in a spirit of collaboration, not conflict, the world economy cannot prosper.
