Published: Fri, October 12, 2018
Markets | By Otis Pena

International Monetary Fund forecasts India's 2018 growth at 7.3 pc, praises GST, bankruptcy code

International Monetary Fund forecasts India's 2018 growth at 7.3 pc, praises GST, bankruptcy code

The IMF on Tuesday cut its outlook for global GDP growth by two-tenths to 3.7 percent for 2018 and 2019, citing the economic uncertainty.

After a visit last week, the International Monetary Fund said Pakistan was facing significant economic challenges, with diminishing growth, high budget and current-account deficits, and low foreign-exchange reserves.

The Breton Woods institution, which said this at the Annual General Meetings of the IMF/World Bank now going in Bali, Indonesia, also revised downwards growth prospects for Nigeria in 2018 from 2.1 per cent to 1.9 per cent. "Inflation is projected to fall to 12.4 percent in 2018, from 16.5 percent in 2017, and to rise to 13.5 percent in 2019", the report read in part.

Christine Lagarde, the IMF director during her opening remarks at the 2018 IMF/World Bank annual press conference Thursday in Bali Indonesia said, economies will need stronger worldwide cooperation because the global economy is strong, but it probably is not strong enough. But it predicts that US growth will slow to 2.5 per cent next year as the effect of recent tax cuts wears off and as US President Donald Trump's trade war with China takes a toll.

Growth is projected to slow to 6.6 percent this year and 6.2 percent in 2019, a downgrade of 0.2 percentage points.

For the eurozone, slow growth means less reductions in high unemployment rates in several countries and difficulty keeping on top of high debt levels, while Japan needs growth to ward off unsafe deflation.

Growth estimates for the eurozone and Britain were also revised down, with the report saying that growth "may have peaked in some major economies". Iran's economy will shrink 1.5 per cent this year and 3.6 per cent in 2019 as oil production and exports plummet.

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IMF's forecasts for Hong Kong's economic outlook are mixed: it raises its forecast for 2018 by 0.2 percentage points to 3.8%, while cutting its forecast for 2019 by 0.3 percentage points to 2.9%.

Lagarde earlier Thursday said the International Monetary Fund had yet to receive anything formal from Islamabad but that she would meet with the Pakistani delegation in Bali.

Thus the expansion of the global economy would be reduced to around 2.9% both next year and in 2020. The report said that aggregate growth in the emerging market and developing economy group stabilised in the first half of 2018.

"Uncertainty over trade policy is prominent in the wake of USA actions (or threatened actions) on several fronts, the responses by its trading partners, and a general weakening of multilateral consultation on trade issues", the report said.

Meanwhile, Dr Obstfeld is concerned that several economies have adopted policies that are "unsustainable over the longer term" to boost growth.

United Kingdom growth has been drastically cut in the aftermath of the Brexit vote; uncertainties surrounding the country's divorce from the European Union have stymied investment and seen part of its key financial sector relocate to the continent.

The IMF said a high interest burden and risks from rising yields in India also require continued focus on debt reduction to establish policy credibility and build buffers.

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