International Monetary Fund cuts global economic growth target to 3.7%

Irving Hamilton
October 10, 2018

Eric LeCompte, a financial expert and executive director of Jubilee USA said: "We are seeing growing debt crises in many developing economies, at the same time, we see risky and speculative behaviour on the raise". "Risks to global growth skew to the downside in a context of elevated policy uncertainty".

Emerging Asia continued to register strong growth, supported by a domestic demand-led pickup in the Indian economy from a four-year-low pace of expansion in 2017, even as activity in China moderated in the second quarter in response to regulatory tightening of the property sector and non-bank financial intermediation, it said.

Reuters contributed reporting to this article.

These are certainly not the best of days for the Nigerian economy as various projections and predictions are not favourable to the economy; as the nation gears up for the 2019 general elections.

Obstfeld said the International Monetary Fund does not see a generalized pullback from emerging markets, nor contagion that will spill over to those emerging economies which have stronger economies and have thus far avoided major outflows, such as some in Asia and some oil and metals exporting countries.

According to the National Bureau of Statistics (NBS), the inflation rate in Nigeria rose to 11.23% year-on-year in August 2018, which is 0.09% higher than the recorded rate in July (11.14%). However, it has considerably reduced its economic growth forecast for 2023 to 1.2 percent, from 1.9 percent in its previous report.

The Fund in its 2018 World Economic Outlook released yesterday also warned that the fragile growth of the region may not be enough for the attainment of the Sustainable Development Goals, if the trend remains for a while.

Following the announcement in September that SA had fallen into a recession, a number of organisations have reduced the country's growth projections. Emerging Asia includes ASEAN 5 countries plus China and India.

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The London-based Capital Economics think-tank said last week that revenues of Saudi Arabia and the five other Gulf states are expected to rise by $200 billion this year compared to 2017 due to high oil prices and output.

It is expected Pakistan will need a bigger sum this year to avoid a balance of payments crisis and stabilise a wobbly economy hurt by a shortage of dollars plus ballooning current account and fiscal deficits.

If the trade war continues, it could take a significant bite out of global growth, according to the fund.

The IMF said its forecast for investment growth for FY19 is weaker than in April, despite higher capital spending in India, on account of contracting investment in economies under stress, such as Argentina and Turkey, which is also reflected in a downward revision for import growth.

"Owing to these changes, our global growth projections for both this year and next are downgraded to 3.7 per cent, 0.2 percentage point below our last assessments and the same rate achieved in 2017", the report said.

The IMF added that "fiscal policy should aim to rebuild buffers for the next downturn, and the composition of public spending and revenues should be created to bolster potential output and inclusiveness".

Also, the International Monetary Fund admits that though oil producing countries like Nigeria are going to benefit from higher prices, it sees signs of lower investment in manufacturing, coupled with weaker trade growth.

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