Thu, Apr 11, 2019 - Page 10 News List

Stimulus may be needed, IMF warns

SIMULTANEOUS ACTION:Governments might need to adopt loose monetary policies and spend at the same time if the global slowdown worsens, the IMF said

Reuters

A delegate takes a selfie outside of the IMF building during the World Bank-IMF Spring Meetings in Washington on Tuesday.

Photo: AP

The global economy is slowing more than expected and a sharp downturn could require world leaders to coordinate stimulus measures, the IMF said on Tuesday as it cut its forecast for world economic growth this year.

The global lender’s semi-annual World Economic Report pointed to the US-China trade dispute and a potentially disorderly British exit from the EU as key risks, and warned that chances of further cuts to the outlook were high.

Some major economies, including China and Germany, might need to take short-term actions, the IMF said.

“This is a delicate moment for the global economy,” IMF chief economist Gita Gopinath told a news conference.

Governments might need to open their pocketbooks at the same time “across economies” if the slowdown becomes more serious, Gopinath said, adding that loose monetary policy might also be needed.

The comments provided an eerie warning to the global officials gathering in Washington this week for the spring meetings of the IMF and World Bank, as the world engaged in coordinated fiscal stimulus to counter the 2008 financial crisis.

In its third downgrade since October last year, the IMF said that the global economy would likely grow 3.3 percent this year, the slowest expansion since 2016.

The forecast cut 0.2 percentage points from the IMF’s outlook in January.

The projected growth rate for next year was unchanged at 3.6 percent.

More than two-thirds of the expected slowdown stems from troubles in rich nations, including members of the EU.

“In this context, avoiding policy missteps that could harm economic activity should be the main priority,” the IMF said its report.

One potential misstep lies in Britain’s indecision over how to leave the EU. Despite looming deadlines, London has not decided how it would try to shield its economy during the exit process.

The new forecast assumes an orderly Brexit, but the IMF said that a chaotic process could shave more than 0.2 percentage points from global growth this year.

The Bank of England should be “cautious” on its interest rate policy, it said in an apparent tip to wait before hiking borrowing costs.

The EU’s economic growth is already slowing substantially, although the IMF said it still expects that the slowdown in Europe and some emerging market economies are to give way to a reacceleration during the second half of the year.

The outlook for Germany, one of the main drivers of European growth, suffered from weaker demand for its exports, softer consumer spending and new emissions standards that have depressed vehicle sales.

Germany might have to quickly turn to fiscal stimulus measures, the IMF said, while calling on the European Central Bank to keep stimulating the regional economy.

The IMF also cut Japan’s growth outlook following a string of natural disasters.

The US economy, while seen outperforming other rich nations’ economies, also got a downgrade on signs that a fiscal stimulus fueled by tax cuts was producing less activity than previously expected.

The IMF said that it supported the US Federal Reserve’s decision to pause its rate-hiking cycle, which it said would support the US and world economies this year by easing financial conditions.

The IMF raised its forecast for US growth next year by 0.1 percentage point to 1.9 percent.

The global lender said it was slightly boosting its outlook for Chinese growth this year — to 6.3 percent — in part because an expected escalation in the US-China trade dispute has not materialized.

This story has been viewed 3054 times.

Comments will be moderated. Remarks containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned.

TOP top