The IMF Paints a Less Robust Economic Picture for 2019

The IMF Paints a Less Robust Economic Picture for 2019

The upward revision showed the combined impact of the recent progress in the China-U.S. trade talks, China's stronger-than-expected fiscal and monetary stimulus, and a slowing global economy, according to Changyong Rhee, director of the IMF's Asia and Pacific Department, Xinhua reported.

Overall the wider regional economy is projected to improve in 2020 to a healthy growth rate of 3.2 percent, the International Monetary Fund said. It has maintained its November estimate for the deficit, which it expects will sit at 0.4%. The World Bank projected 3.4 % while ADB estimated 3.9 % GDP growth rate for Pakistan in the current fiscal year ending June 30.

"Growth in the Middle East, North Africa, Afghanistan, and Pakistan region is expected to decline to 1.5 percent in 2019, before recovering to about 3.2 percent in 2020". Growth for the sub-region - which also includes Indonesia, Malaysia and Thailand - has been retained at 5.1% this year and 5.2% for 2020, beating the trend as most forecasts were slashed.

In addition to the pressure from the trade war and the Fed's statements, the IMF's 2019 prediction was also impacted by the potential ramifications of a no-deal Brexit and political tensions in several economically-strategic countries.

The loss of growth momentum, said Gopinath, dates back to the second half of 2018, when the world economy was hit by "a significantly weakened global expansion". If the downside risks do not materialize and the policy support put in place is effective, global growth should rebound.

The agency also pointed to uncertainty around the new NAFTA agreement, which is yet to be ratified, as a downside risk to the global outlook.

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Europe's economic growth is already slowing substantiall yand it accounted for much of the reduction in the global growth forecast.

Instead, China should continue its focus on deleveraging and rebalancing its economy away from credit-based expansion to a economy is more sustainable and provides growth based on private consumption. From an equivalent of 2.6% to gross domestic product (GDP), the gap is expected to narrow to 2.2% of GDP this year and then to 1.8% of GDP next year.

Growth among advanced economies is seen easing to 1.8% from 2.2% a year ago, while expansion of emerging markets is seen softer at 4.4% from the 4.5% estimate under the latest WEO Update.

The IMF and World Bank are holding their spring meetings in Washington this week. The lender's growth forecast of 8.8 percent for the producer of cocoa, gold and oil is more optimistic than the 7 percent that had been forecasted by the Ghanaian government.

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

"Excessive stimulus to support near-term growth through a loosening of credit standards, or a resurgence of shadow banking activity and off-budget infrastructure spending, would heighten financial vulnerabilities, reduce future policy space, and raise downside risks to medium-term growth", the International Monetary Fund said.

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