IMF Still Expects Global Economy to Grow 3.9% This Year
July 16 2018 - 4:52PM
Dow Jones News
By Josh Zumbrun
Despite months of negative headlines -- from escalating trade
conflicts to European political turmoil to emerging-market currency
declines -- global economic growth has remained robust.
The International Monetary Fund said the global economy is on
course to grow 3.9% this year and next. That is unchanged from its
April forecasts, and would represent the best back-to-back years of
growth since 2010 and 2011 when the world enjoyed a fleeting
snapback from the financial crisis.
Despite the headline figures, the IMF's forecasts released
Monday in Washington struck a downbeat tone, highlighting that
growth has become less evenly spread among countries compared with
last year. It noted, in particular, the major risk that a U.S.-led
escalation of trade confrontations would pose to the global
economic outlook.
The "risks to the outlook are mounting," the IMF said.
The IMF's chief economist Maurice Obstfeld called the trade
tensions "the greatest near-term threat to the world's growth." He
said an IMF model suggests that if current trade policy threats are
realized, it would reduce global growth 0.5% below current
projections in 2020 -- a sum amounting to hundreds of billions of
lost economic output.
"Trade actions to date, while they are indeed broadly negative,
they frankly apply to a rather small range of exports," said Mr.
Obstfeld.
The Trump administration has threatened to apply tariffs to
hundreds of billions of Chinese imports and automobile imports. But
for now, the major actions it has taken have been to impose tariffs
on imported steel and aluminum, about $34 billion of Chinese goods,
and washing machines and solar panels.
Mr. Obstfeld noted that while the U.S. has applied new tariffs
to all its major trading partners, most of those trading partners
are not in conflict with each other.
The IMF forecast the U.S. economy will grow 2.9% this year,
unchanged from its April estimate. It lowered its forecasts for the
eurozone and Japan by 0.2 percentage points each. Canada's outlook
was unchanged. Other advanced economies strengthened by 0.1
percentage point.
The forecast for emerging-markets growth was unchanged overall.
Declines in the economic forecast for Latin America, where
currencies have been hardest hit, have garnered the most attention.
But that has been partially offset by gains in growth elsewhere,
especially in the oil-producing Middle East, which is benefiting
from higher crude prices.
"After the euphoria of 2017, the outlook has undoubtedly become
more clouded," said Ben May, director of global macro research for
Oxford Economics. "But we remain cautiously optimistic despite the
recent global protectionist spats."
Recent data "points to only a moderate loss of growth momentum
from a solid starting point," Mr. May said.
Mr. May noted that global purchasing managers' indexes have
remained firmly in positive territory. Labor-force participation
rates across advanced economies have continued rising, providing a
boost to labor supply. Some measures of productivity growth appear
to be turning upward after long doldrums. Surveys of investment
intentions show many businesses retain a bright outlook.
Write to Josh Zumbrun at Josh.Zumbrun@wsj.com
(END) Dow Jones Newswires
July 16, 2018 17:37 ET (21:37 GMT)
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