ECA

Efic’s global economic update out now

05.11.2018 Efic

Rising trade tensions, ongoing geo-political ructions and tighter financing conditions saw the IMF cut its global growth forecast by 0.2 percentage points to 3.7% per annum in 2018 and 2019. While the global economy remains on track to match last year’s performance, which was the strongest pace of growth since 2011, this was the first IMF downgrade in more than two years.

While the global economy remains on track to match last year’s performance, which was the strongest pace of growth since 2011, this was the first IMF downgrade in more than two years.Across advanced economies, the downward revisions were led by the UK and the Euro area. In emerging markets, Brazil, Turkey, South Africa and Iran were responsible for the weaker outlook.

The IMF also flagged growing risks to the outlook whilst curbing the possibility of upside surprises. In particular, the IMF stressed the risk of even tighter global credit conditions, which could accelerate capital flight from emerging economies, along with further deterioration in the US trade spat with China and other countries. The IMF modelled a worst case scenario where the US implements a 25% tariff on an additional US$267b of Chinese imports and imposes a 25% tariff on all imported cars. This invokes an equal response from the US trading partners affected by the tariffs. The impact on the US is greatest, resulting in a 0.9% reduction in long run GDP. IMF results suggest that the average American would lose US$656 per annum, in China each person would be US$83 worse off, while globally the average person would be US$54 worse off (Chart).


Other stories in the latest edition of World Risk Developments:
  • Emerging Asia—Repeat of 1997 crisis unlikely
  • PNG—Sovereign bond issue bodes well; but FX shortages remain
  • MENA—Oil price gains should support greater public spending
  • Brazil—New president highlights shift away from centrist politics
  • Latin America—Fast growing consumer market offers opportunities
Sign up now to receive the next edition.


 

Get Regular Updates
Search
eca
x
x