International Monetary Fund cuts India growth forecast for 2018 by a notch to 7.3%

IMF expects growth in SA to pick up, but escalating trade tension is a huge risk

"The risk that current trade tensions escalate further - with adverse effects on confidence, asset prices and investment - is the greatest near-term threat to global growth". Other threatened actions, which include another round of tariffs on an additional $200 billion in Chinese goods and a 25 percent US global tariff on auto imports now under study, are also included.

The International Monetary Fund (IMF) on Monday marginally cut India's growth projection for 2018 and 2019 to 7.3 per cent and 7.5 per cent respectively.

Fears of a global supply crunch following outages in Libya and Venezuela have led to an nearly 5% jump in crude oil prices since April when International Monetary Fund released its WEO.

The report comes as US President Donald Trump has imposed steep tariffs duties on $34 billion in imports from China, with another $200 billion coming as soon as September, on top of duties on steel and aluminum from around the world including key allies.

Obstfeld said that although some factors have negatively impacted the global growth since April, they were not significant enough to reduce the projection.

The IMF also warned that a global trade war threatened worldwide growth and flagged uncertainties in the EU.

The IMG noted that the United States had initiated trade actions affecting a broad group of countries, and faced retaliation or retaliatory threats from China, the European Union, its NAFTA partners, and Japan, among others.

Beyond the immediate threat from weaker levels of worldwide trade, the IMF said that greater use of protectionist measures could hinder business investment, disrupt global supply chains, slow the spread of productivity-boosting technologies and raise the price of consumer goods.

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Global cooperation and a "rule-based trade system has a vital role to play in preserving the global expansion".

And while the fiscal stimulus will boost United States demand, it also will increase inflationary pressures, the WEO warned.

The sweeping United States tax cuts approved in December will help the economy "strengthen temporarily" but growth is expected to moderate to 2.7 percent for 2019. While the U.S. faces greater risks from trade, the fund said that Trump's tax cuts would also mean the American economy would continue to grow in line with its previous estimates of around 2.4 per cent this year.

China's growth also is seen slowing in 2019 to 6.4 percent.

The IMF left unchanged its global growth forecasts at 3.9% for both 2018 and 2019, compared to its previous forecast issued in April. France's GDP is expected to grow 1.8 percent and 1.7 percent.

In an update to its World Economic Outlook (WEO), IMF trimmed India's growth projection for 2018-19 by 10 basis points to 7.3%, citing negative effects of higher crude oil prices on domestic demand and faster-than-anticipated monetary policy tightening due to higher-than expected inflation.

Update reduced by 0.1 per cent the projections made in April for this year and by 0.3 per cent for 2019.

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