International Monetary Fund reviews Ukraine's GDP downward growth forecast for 2019

Javier Stokes
April 18, 2018

Yet it warns of looming worries - potential trade wars; rising interest rates; heavy spending in certain countries, including the us, which could leave little fiscal space for the next downturn; and insufficient worker skills to deal with technological changes.

"IMF chief Christine Lagarde last week warned governments to "steer clear of protectionism in all its forms", saying the trade frictions hurt poor consumers the most as costs increase, and that they also undermined a system that had broadened prosperity worldwide".

"While the global market for smartphones may become saturated, demand for other electronics products continues to boost production of semiconductors, particularly in Korea", the International Monetary Fund said in its latest World Economic Outlook.

Maurice Obstfeld, Economic Counsellor and Director of the Research Department, IMF said that the world economy continues to show broad-based momentum.

It now sees Australia growing at three per cent in 2018 compared to its previous 2.9 per cent prediction made in February, while keeping 2019 at 3.1 per cent. This is increasing the risk of various asset class bubbles emerging - or bursting.

"If policymakers are complacent and do not tackle the challenge of strengthening long-term growth, political risks could intensify, possibly reversing some of the progress that economic reforms and integration have achieved to date".

Describing the United States fiscal position as "unsustainable" it urges the U.S. to stabilise and reduce its debt level, and withdraw the pro-cyclical stimulus that is already in the economy.

There was a case for being prudent about government debt levels, although New Zealand's position remained "comfortable", he said.

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Trump is pushing China to reduce its massive US$375bn trade surplus with the United States by US$100bn and change its policies that he says force American companies to hand over their technology and intellectual property to Chinese companies.

"Compared with our October 2017 projection, which preceded the recent USA tax and spending changes, we now expect the United States' current account deficit for 2019 to be roughly 150 billion dollars higher", he said.

The Trump administration has maintained that Republican tax cuts passed last year would allow the United States to maintain sustained gross domestic product growth above 3 percent for years and defy forecasts that us budget deficits will balloon over the coming decade. It projected that in general, the global economy would grow by 3.9 percent.

House attributes the rosier USA outlook to federal tax cuts, a massive US$300-billion spending package and the possibility of an additional spending or infrastructure bill.

However the International Monetary Fund says the stimulus will be "temporary". For next year, the forecast has been slightly reduced, to 1.5%.

The unemployment rate was 5.6 per cent in February.

The IMF predicts projected that GDP growth in Sub-Saharan Africa will increase gradually during 2018-19 to 3.4% and 3.7%, respectively, as commodity prices rise. Japanese economic growth is forecast to decelerate to 1.2 percent from 1.7 percent in 2017.

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