The window of opportunity to keep global growth on track is “narrowing” amid trade disputes and emerging markets crises, the IMF said yesterday, adding that a currency war should be avoided as the US-China spat threatens to boil over.
The warning from the IMF came at its annual meeting with the World Bank on Bali, after it cut this week its outlook for global GDP growth by 0.2 percentage points to 3.7 percent for this year and next.
“Everyone is going to suffer” from a trade-and-currency clash between the US and China, the world’s two biggest economies, the IMF added.
“Risks are increasingly skewed to the downside amid heightened trade tensions and ongoing geopolitical concerns, with tighter financial conditions particularly affecting many emerging market and developing countries,” the IMF said in a statement.
Historically high public debt was among the red flags that “could further undermine confidence and growth prospects,” it added.
“With the window of opportunity narrowing, we will act promptly to advance policies and reforms to protect expansion, mitigate risks, rebuild policy space, enhance resilience and raise medium-term growth prospects for the benefit of all,” it said.
The IMF appeared to take aim at the two powerhouse economies that are locked in an increasingly bitter tit-for-tat tariff battle.
“We will refrain from competitive devaluations and will not target our exchange rates for competitive purposes,” the IMF said.
“We acknowledge that free, fair and mutually beneficial goods and services, trade and investment are key engines for growth and job creation,” it said.
Markets have been roiled by a plunge in some emerging market currencies — including in Turkey and Argentina — as domestic financial crises and higher US interest rates lured return-hungry investors to the US dollar.
The IMF said it would push to improve the WTO and boost confidence in the global trading system.
It added that it would continue to help countries deal with the social and economic costs of “pandemics, cyber-risks, climate change and natural disasters, energy scarcity, conflicts, migration and refugee, and other humanitarian crises.”
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