IMF calls for joint efforts to safeguard multilateral trading system

By Wu Lejun

The international growth projections for both this year and next are downgraded to 3.7 percent, 0.2 percentage points below the last assessments made this July, according to the latest World Economic Outlook issued by the International Monetary Fund (IMF) on Tuesday.

The IMF warned that the escalating trade tensions were key threats to the global outlook, suggesting that each economy should foster cooperation to safeguard the rules-based multilateral trading system, de-escalate and resolve the current trade disputes, and promote global economic growth.

The IMF pointed out that downside risks to global growth had arisen in the past few months, such as rising trade barriers and a reversal of capital flows to emerging market economies with weaker fundamentals.

Now, in October 2018, the outlook had become one of less balanced and more tentative expansion than IMF hoped in the previous reports, the organization said.

Growth in the US was expected to maintain at 2.9 percent in 2018, but would soften to 2.5 percent in 2019 due to the recently introduced trade measures. In addition, US growth would decline as fiscal stimulus began to unwind in 2020, at a time when the monetary tightening cycle was expected to be at its peak, the IMF said.

The report said the growth of advanced economies was expected to be in a downward trend, explaining that the biggest secular challenge for many advanced economies centers on the slow growth of workers’ incomes, perceptions of lower social mobility, and, in some countries, inadequate policy responses to structural economic change. It further soured the public mood, and in turn helped give rise to current tensions.

In China, growth is projected to be at 6.6 percent, according to the report. The IMF said that many emerging markets achieved great progress because of the flexible exchange rate regimes they adopted, but these countries also saw increased vulnerabilities in the aftermath of global impacts.

Since April this year, the US has imposed tariffs on a variety of imports, and its trading partners have undertaken or promised retaliatory and other protective measures.

The rising trade tensions and policy uncertainty raised concerns about global economic prospects, said the report, explaining that these factors could lead firms to postpone or forgo capital spending and hence slow down growth in investment and demand.

The IMF believes that an increase in trade barriers would disrupt global supply chains, and slow the spread of new technologies, ultimately lowering global productivity and welfare.

It would also make tradable consumer goods less affordable, harming low-income households disproportionately, the report added.

IMF Economic Counsellor Maurice Obstfeld remarked that more and more signs indicated that the trade tensions had caused negative impacts for enterprises.

The global economy would be contracted by about 0.8 percent in 2020 if the trade tension continued, he said, adding that it would reduce enterprises’ confidence and investment, and bring severe damage to global economy.

IMF Managing Director Christine Lagarde recently mentioned the gloomy prospect for global economic growth, saying trade barriers were increasing. “Rhetoric on trade barriers is hurting not only trade itself, but also investment and manufacturing as uncertainty continues to rise,” she said.

The IMF official called on economies around the world to "de-escalate and resolve the current trade disputes", and urged countries to work together to build a global trade system that is "stronger, fairer, and fitter for the future."

Source: People’s Daily