IMF Warns Policymakers to 'Do No Harm' as World Economy Wobbles

Galtero Lara
Abril 15, 2019

"This includes trade tensions, policy uncertainty, geo political risks and a sudden sharp tightening of financial conditions against a backdrop of limited policy space, historically high debt levels and heightened financial vulnerabilities".

"I think this is true for all worldwide institutions with the concerns about what's happening with world cooperation with multilateralism", Gopinath told Xinhua in a recent interview on the sidelines of the spring meetings of the World Bank and the IMF in Washington.

"We agreed we need to act promptly to protect the expansion".

Coinciding with the institutions' meetings was a gathering of world financial leaders and central banks, who said the global economy was likely to pull out of a brief slump later this year. The IMF cut its forecast for global growth from 3.6 per cent last year to 3.3 per cent in 2019, the slowest since the recession year 2009, but it predicts growth will return to 3.6 per cent in 2020.

His remarks suggest the PBOC will likely abstain from cutting its base interest rates this year - a move anticipated by some economists due to China's lowered GDP growth projections.

Chen also said that China will continue to impose "prudent monetary policy and proactive fiscal policy", to make sure that its economic growth is kept stable.

There is some cause for optimism.

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At a closing news conference, the committee chairman, Lesetja Kganyago, head of the central bank of South Africa, said every country needs to be ready to address issues involving financial stability "with all available tools". In Europe, numerous global factors weighing on growth appear to be waning, keeping alive expectations for a recovery in the second half of the year, European Central Bank President Mario Draghi said at a separate press conference.

Trade disputes, especially the standoff between the United States and China, have been a central talking point at the meetings this week and have been widely cited as a primary driver behind the weakening of the global economy.

The comments came as Beijing and Washington seek a deal to end a bitter trade war marked by tit-for-tat tariffs that have cost the world's two largest economies billions of dollars, disrupted supply chains and rattled financial markets.

Rhee told Xinhua that the upward revision reflected the combined impact of recent developments in the China-U.S. trade talks, China's stronger-than-expected expansionary fiscal policy, and a slowing global economy.

In remarks to the World Bank's steering committee on Saturday, Mnuchin said the USA was encouraged that the bank's private sector lending operation wanted to step up support for nations "affected by fragility, conflict and violence".

He urged the U.S. and other nations to resolve their trade conflicts - a key downside risk the International Monetary Fund has repeatedly warned about since President Donald Trump began imposing tariffs past year. He said that it has also limited the scope for multilateral cooperation, taking a swipe at the "America First" trade policies of the Trump administration.

But Chen Yulu, deputy governor of People's Bank of China, struck a less positive stance in his remarks to the International Monetary Fund policy committee, contending that rising trade protectionism in the form of punitive tariffs had already begun to disrupt global supply changes.

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