International Monetary Fund lowers global growth estimates

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International Monetary Fund lowers global growth estimates

On Tuesday, the International Monetary Fund (IMF) revised its global growth estimates for 2018 and 2019. The downward revision by the IMF comes during the same time that the IMF and the World Bank are going to be holding their yearly meeting in Bali, Indonesia.

The reason for the IMF reducing its initial growth estimates is because of the imposition of duties on imports – read between the United States and China – and the under-performance of certain economies both developed and developing, including countries in the European Union, Great Britain, Japan, South Africa, Argentina, Turkey and Brazil.

As such, the IMF brought down its growth estimates to about 3.7% for both 2018 and 2019, which is a slight reduction to its July 2018 estimate of 3.9% for the two years. The IMF also spoke about the American economy which seems to be on a bullish trend and cautioned that the economy could soon encounter the bear.

The reason for this, according to Maurice Obstfeld, the IMF's chief economist is because, "(The) US growth will decline once parts of its fiscal stimulus go into reverse. Notwithstanding the present demand momentum, we have downgraded our 2019 US growth forecast owing to the recently enacted tariffs on a wide range of imports from China and China’s retaliation."

In broader terms, with the effects of the imposition and the countering of duties by the United States and China to be felt in 2019, the IMF reduced its estimates of growth for the US to about 2.5% for 2019, which again is a reduction of about 0.2% from its initial estimate of 2.7%.

The IMF has, therefore, not changed its estimate for the US' growth in 2018 keeping it as is at 2.9%. With respect to China, the IMF reduced its growth estimates for 2019 to 6.2% from its initial estimation of 6.4%. And, as with the US, the IMF left its estimates for China's growth for 2018 unchanged at 6.6%.

The IMF's reducing of its estimates comes a few days after the World Bank reduced its growth estimates for its East Asian and Pacific region, focusing specifically on China.