Window 'narrowing' for global economy, IMF warns

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The window of opportunity for safeguarding global growth is "narrowing" as trade disputes deepen and emerging markets face fiscal crisis, the IMF said Saturday, warning countries against worsening things by weaponizing currency and interest-rate policies.

The IMF said in a communique that while global growth currently remained "steady," the risks are "increasingly skewed to the downside amid heightened trade tensions and ongoing geopolitical concerns."

The Fund kicked off its annual meeting with the World Bank on the Indonesian resort island earlier in the week in a gloomy mood, preoccupied by the trade tussle between the world's two biggest economies, and tightening financial conditions faced by emerging markets.

On Tuesday, it cut its outlook for global GDP growth by 0.2 percentage points to 3.7 percent for 2018 and 2019, citing the trade war.

"The window of opportunity [is] narrowing," the 189-member organization said, adding that members would "refrain from competitive [currency] devaluations and will not target our exchange rates for competitive purposes".

US Secretary of the Treasury Steven Terner Mnuchin this week said he had told the head of China's central bank about his concerns over the weakness of its currency.

Yi Gang, governor of China's central bank, the People's Bank of China, has made it clear at the annual meeting that China "will not engage in competitive devaluation, and will not use the exchange rate as a tool to deal with trade frictions."

US President Donald Trump has accused Beijing of depreciating its currency to absorb the impact of US trade tariffs.

But Mnuchin, speaking on the Bali meeting's sidelines, declined to comment on whether Washington would declare Beijing a "currency manipulator" in a Treasury report due out next week.

Attention has begun to turn toward hopes that Trump and Chinese President Xi Jinping could meet on the sidelines of the G-20 summit next month in Argentina and bury the hatchet with some sort of agreement.

The IMF statement said it would push to improve the World Trade Organisation and boost confidence in the global trading system.

It added that it would continue to help countries deal with the social and economic costs of "pandemics, cyber risks, climate change and natural disasters, energy scarcity, conflicts, migration, and refugee and other humanitarian crises."

The IMF has warned that "everyone is going to suffer" from the US-China trade clash.

Source(s): AFP