You are here

IMF chief warns against trade war consequences on global growth

Trade disputes can threaten global financial stability

By Mohammad Ghazal - Oct 17,2019 - Last updated at Oct 17,2019

IMF Managing Director Kristalina Georgieva arrives at a news conference during the IMF/World Bank 2019 Annual Fall Meetings on Thursday in Washington, DC (AFP photo)

WASHINGTON, DC — Policymakers across the world must resolve cross-border trade tensions, mitigate risks and support growth, International Monetary Fund Managing Director Kristalina Georgieva said on Thursday as she warned that trade tensions are posing a mounting risk to the global economy and financial markets.

“The global economy has experienced a synchronised slowdown and growth remains weak. Escalating trade disputes, entrenched policy uncertainty, and adverse geopolitical developments have taken a toll on confidence investment and growth,” Georgieva said in her Global Policy Agenda released on Thursday in Washington.

Georgieva, the Bulgarian economist and former World Bank chief executive, said on Thursday the outlook remains precarious as trade conflicts, policy uncertainty and geopolitical threats undermine confidence, investment  and growth.

The International Monetary Fund highlighted trade tensions as a reason in reducing its 2019 global growth forecast announced this week to 3 per cent. The World Bank cut its 2019 forecast in June to 2.6 per cent and projected a slow rebound to 2.7 per cent in 2020 and to 2.8 per cent in 2021.

To enhance confidence, she called for coordination on international taxation, preserving the post-crisis reforms to global financial regulation and preserving excessive low-income country debt building.

She warned that trade disputes could spill over to monetary, exchange rate, or financial sector policies, threatening global financial stability and jeopardising hard-won economic gains.

“The focus must be on reversing tariff increases and finding lasting solutions to trade disputes, including by removing domestic distortions and strengthening the multilateral trading system,” she added.

According to projections announced by the fund this week, world trade volume growth will crater this year to 1.1 per cent from 3.6 per cent in 2018, though it also sees some recovery next year.

“There are significant risks," Georgieva said. “Growth could be derailed if trade disputes lead to further cross-border restrictions, including on technology, or incite broader monetary, exchange rate, or financial sector policy actions."

Georgieva stressed that domestic policies should focus on more resilient, adaptable and inclusive economies.

The global economic outlook is likely to worsen further unless policy makers resolve uncertainty about trade and Brexit, World Bank President David Malpass said.

“I think there are possibilities for improvement in the outlook into 2020,” Malpass told reporters in Washington on Wednesday. Those would include greater clarity on US-China trade and Brexit, and growth-boosting policy changes in certain countries, he said.

 “As we look at the data today, we will probably be looking at a further downgrade,” Malpass said.

That said, “there are always possibilities for good news” .

2 users have voted.

Add new comment

This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.
16 + 3 =
Solve this simple math problem and enter the result. E.g. for 1+3, enter 4.


Get top stories and blog posts emailed to you each day.