FINANCIAL CRISIS WARNING: Global economy 'AT RISK from risky undercurrents'

FINANCIAL CRISIS WARNING: Global economy 'AT RISK from risky undercurrents'

FINANCIAL CRISIS WARNING: Global economy 'AT RISK from risky undercurrents'

International Monetary Fund (IMF) chief Christine Lagarde on Thursday defended central bank rate hikes in a veiled rebuke to Donald Trump after the U.S. president blamed "crazy" Fed policies for contributing to financial market turmoil. The May federal budget forecast 3 per cent GDP in 2018-19 and the same the following financial year.

These policies have contributed to a slowdown in economic growth, which is happening just as trade tensions with the US are starting to bite.

The IMF, in the WEO report, said inflation pressures in sub-Saharan Africa had broadly softened, with annual inflation projected to drop to 8.6 per cent in 2018 and 8.5 per cent in 2019, from 11 per cent in 2017.

The body now expects the USA economy to grow at a rate of 2.5 percent in 2019, a 0.2 percentage point decline from its April estimates.

Trump had blamed "crazy" Fed policies for contributing to current financial market turmoil as a global sell-off continued amid stronger signs of rising financial volatility which the International Monetary Fund and the World Bank were scheduled to address during their annual meetings.

In the latest report, Taiwan's major trade partner South Korea is projected to grow 2.8% and 2.6% for 2018 and 2019, respectively, downward revisions by 0.2 and 0.3 percentage points from previous forecasts.

Last year, China shipped goods worth $375 billion more to the USA than it took in from the United States, a figure Trump has often said he wants to curb sharply in an effort to promote American businesses.

A senior US Treasury official, who briefed reporters on Monday, also expressed concern about the depreciation of the Chinese currency, as well as recent moves by Beijing to strengthen government control over the exchange rate. The report said that aggregate growth in the emerging market and developing economy group stabilised in the first half of 2018.

While Nigeria will grow from 1.9 per cent in 2018 to 2.3 percent in 2019, South Africa and Angola were projected to move from 0.8 to 1.4 and -0.1 to 3.1 per cents respectively, the International Monetary Fund said yesterday.

"We will be listening very, very attentively when and if they come to us", said Obstfeld.

It found that global GDP output under this scenario would fall by more than 0.8% in 2020 and remain roughly 0.4% lower in the long-term compared to levels without these effects, which "inflict significant costs to the global economy, especially through its impact on confidence and financial conditions".

Prominent U.S. academic Jeffrey Sachs was less diplomatic in his assessment of Trump's shepherding of American trade relationships, slamming the president's repeated claims that deficits with China and other nations meant Americans were being taken advantage of.

Much of the global angst has been dominated by Trump's escalating tariff war with China and his disdain for world trading norms.

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