IMF DOWNGRADE: The International Monetary Fund revised its outlook for the world economy, citing rising interest rates and growing tensions over trade.
Oil prices, which account for about 80 percent of Saudi public income, have increased by more than 70 percent since June a year ago to over $80 a barrel.
Maurice Obstfeld, the IMF Economic Counsellor, warned against the rising tide of protectionism, saying that without multilateralism “the world will be a poorer and more unsafe place”. Monetary policy tightening 3.
The fund also slightly lowered its forecast for Japan’s economy to 1.1 per cent growth in 2018, down 0.1 of a percentage point from an April estimate, but maintained a prediction for a 0.9 per cent Japanese expansion in 2019. The Nasdaq Composite dropped 7.44 points, or 0.10 per cent, to 7,728.51 at the opening bell.
India’s move marks the second time in recent weeks New Delhi has disregarded the Trump administration’s threat of sanctions. India’s economy grew 6.7 per cent in FY18.
“IMF’s downgrade just goes to show how the tariff dispute between USA and China is beginning to take its toll on the global economy”, said Peter Cardillo, chief market economist at Spartan Capital Securities in NY.
Global trade is projected to expand by 4.2 per cent this year – 0.6 per cent less than expected in July – dropping to four per cent next year.
The IMF releases its annual WEO ahead of its meeting with the World Bank. As a finance expert, LeCompte has tracked International Monetary Fund meetings for almost 10 years and is attending the meetings in Bali.
The IMF announced it had reduced its outlook on the global economy to a 3.7% growth rate for this year and next, down 0.2% from what it had originally predicted in July.
It said reform priorities in India include reviving bank credit and enhancing the efficiency of credit provision by accelerating the clean-up of bank and corporate balance sheets and improving the governance of public sector banks.
Abid Qamar, a spokesman at State Bank of Pakistan, said the market knows the macroeconomic conditions and based on those, they are having their own expectations for the exchange rate.
The global organisation said that inflation is expected to pick up in India due to a narrowing output gap, and the effects of exchange rate depreciation and rising fuel prices. “In the case of a flexible exchange rate regime and a further utility price hike, the country would have to face massive inflationary pressure that would trigger unemployment and poverty”, Wizarat said.
ANALYST’S TAKE: “Renewed tension between the U.S. and China has capped risk sentiment as a range of issues from trade to diplomacy are likely to challenge China-U.S. relationship”, Zhu Huani of Mizuho Bank said in a commentary.