IMF Cuts Growth Outlook

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The International Monetary Fund announced on Tuesday that it expects the global economy to grow at a rate of 3.3 percent, lower than the 3.5 percent originally predicted. The cut came on the heels of an expectation for tighter monetary policy from the Federal Reserve, and from continuing trade wars and tariff threats which could raise prices for consumers worldwide.” The balance of risks remains skewed to the downside,” the IMF said in a statement. “Failure to resolve differences and a resulting increase in tariff barriers above and beyond what is incorporated into the forecast would lead to higher costs of imported intermediate and capital goods and higher final goods prices for consumers.”

The comments were made while Washington struggles to hammer out a trade deal with China and bring its United States-Mexico-Canada-Agreement (USMCA) to reality. The agreement is meant to replace NAFTA (the North Atlantic Free Trade Agreement), but hasn’t yet received Congressional approval despite being signed at the end of November. If the deal disintegrates, the U.S. economy could face harmful fallout, as it faces losing the partnership of its two biggest trade partners, Mexico and Canada.

Asian markets struggled after the IMG’s announcement, with Japan’s Nikkei 2225 falling 0.63 percent as of 12:18 p.m. HK/SIN. The Shanghai Composite was down 0.39 percent and Hong Kong’s Hang Seng Index was 0.42 percent lower. Australia’s ASX 200 and South Korea’s Kospi both managed to eke out modest gains, trading up 0.04 percent and 0.09 percent respectively. The losses followed a down day on Wall Street during which the S&P 500 snapped its eight-day winning streak and the Dow Jones Industrial Average and the NASDAQ also ended lower.

In addition to the pressure from the trade war and the Fed’s statements, the IMF’s 2019 prediction was also impacted by the potential ramifications of a no-deal Brexit and political tensions in several economically-strategic countries. 

Sara Patterson has a Master’s Degree in political science and enjoys analyzing both current events and the international markets to get a fuller perspective of the currency market. Before turning to financial writing, she taught English writing skills to high-school age students. Sara’s work has been published on various financial and Forex blogs.