US, China trade war could dent economic growth

Pakistan       by Usman Arshad | Published

Pakistan by Usman Arshad | Published

The ongoing trade war between the US and China could start having material effects on the economies of both countries within the coming years, according to new projections from the International Monetary Fund (IMF).

Reflecting such sentiments, growth in trade of goods and services across the world was revised down 0.6 point from the July forecast to 4.2 percent in 2018 and 0.5 point to 4.0 percent in 2019, according to the report.

"It occurs as many economies have reached or are nearing full employment and as earlier deflationary fears have dissipated".

LCCI former vice president Kashif Anwar said that he was expecting another hike in gas and electricity tariff by reducing energy related subsidies, containing the burgeoning fiscal account as well as circular debt.

"We will be listening very, very attentively when and if they come to us", said Obstfeld. "Growth has proven to be less balanced than hoped". "Several of the downside risks highlighted in the April 2018 World Economic Outlook (WEO) ... have become more pronounced or have partially materialized".

"Going to the International Monetary Fund is a positive trigger because it will remove the underlying causes for concern, which is that government targets will further weaken", said Suleman Maniya, head of research at local brokerage house Shajar Capital.

The IMF also cut its outlook for China as a result of the tariffs, shaving its projection for growth next year to 6.2 per cent, down 0.2 point from three months ago.

France and Germany will be among the hardest hit by a global slowdown caused by USA protectionism, the International Monetary Fund (IMF) has warned.

But the outgoing chief economist - who retires from the Fund later this year - added that it was a "mixed picture" with some Latin American and African nations getting growth forecast upgrades.

The growth rate of United States for 2018 is 2.9 per cent and that of 2019 has been powered to 2.5 per cent.

With their core inflation rates largely quiescent, advanced economies continue to enjoy easy financial conditions.

Emerging Asia continued to register strong growth, supported by a domestic demand-led pickup in the Indian economy from a four-year-low pace of expansion in 2017, even as activity in China moderated in the second quarter in response to regulatory tightening of the property sector and non-bank financial intermediation, it said.

The downgrade reflects a confluence of factors, including the introduction of import tariffs between the United States and China, weaker performances by eurozone countries, Britain and Japan, and rising interest rates that are pressuring some emerging markets with capital outflows, notably Argentina, Brazil, Turkey, South Africa, Indonesia and Mexico.

"But there is no denying that the susceptibility to large global shocks has risen".

The government has come under criticism from various quarters, including the opposition, for delaying the decision to approach the International Monetary Fund soon after Khan's party won the general election on July 25.

It said the ongoing Brexit negotiations had created "pervasive uncertainty" about future trade costs.

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