Risks to global financial system rise

  • Risks to global financial system rise

Risks to global financial system rise

Trade tensions are expected to continue although Fund officials view US-Mexico-Canada trade agreement as a positive sign.

The IMF said Tuesday it projects continued growth in the United States, but at a slower pace next year.

"China and a number of Asian economies are also projected to experience somewhat weaker growth in 2019 in the aftermath of the recently announced trade measures", it said.

"There are clouds on the horizon".

Speaking to journalists in Bali, the Deputy Director, Research, IMF, Gian Maria Milesi-Ferretti, said the largest economies on the continent were holding down economic development in Africa as a result of poor growth rate. "Not only have some downside risks we identified in the last WEO (World Economic Outlook) been realised, the likelihood of further negative shocks to our growth forecast has risen". In September, Trump imposed tariffs on almost $200 billion of Chinese imports, with China responding with higher tariffs on about $60 billion of USA imports. The IMF also warned the new government that growth would likely slow and inflation rise further if it does not act fast.

Foreign-currency reserves have plunged 40% in 2018 to the lowest in nearly four years, while the nation is running twin current-account and budget deficits of more than 5% of gross domestic product. But it predicts that US growth will slow to 2.5 percent next year as the effect of recent tax cuts wears off and as President Donald Trump's trade war with China takes a toll.

The IMF's cut to its outlook was broad-based.

It kept the 7.3 per cent growth projection for this year made in July.

In September, the US implemented another round of tariffs on $200 billion worth of Chinese goods, which were met with countermeasures out of Beijing on $60 billion worth of USA goods.

Among major middle-income countries in sub-Saharan Africa, SA has the lowest projected growth rate for 2018, according to the International Monetary Fund, after Cameroon and Zambia, both projected to grow at 3.8% in 2018.

The current account deficit widened 43 percent to $18 billion in the year that ended June 30, while the fiscal deficit ballooned to 6.6 percent. Britain's FTSE 100 dropped 0.4 per cent to 7,201.

"It was a combination of factors that basically affected emerging and frontier markets".

"Considerable progress was made in Russian Federation in recent years to shore up financial stability, including by closing weak banks, introducing reforms to the resolution framework, enacting measures to reduce dollarization, and increasing the risk weights of unsecured consumer and mortgage loans", the International Monetary Fund said.

Core inflation, which excludes volatile items such as energy, will vary from country to country, it added.

"In several key economies, moreover, growth is being supported by policies that seem unsustainable over the long term", he said.