Business

Trade rows cloud global economy as officials fret over slowdown

Hard Brexit, trade wars are among the risks: Experts

WASHINGTON: Trade disputes and tighter financial conditions are among the top threats to a slowing world economy, global finance officials said on Saturday, urging countries to take steps to shore up growth.

The global expansion, now seen at its most sluggish pace in three years, is likely to firm up next year, but central banks and fiscal authorities have limited policy options to drive a rebound, officials said in a joint communique of the International Monetary Fund (IMF) steering committee.

"While we expect to see a pickup (in growth) next year, trade tensions, geopolitical risks, political instability are among the challenges," South African Reserve Bank governor Lesetja Kganyago, the committee's chairman, said at a press conference after the panel adjourned its semi-annual meeting.

"We agreed we need to act promptly to protect the expansion," Mr Kganyago said, capping the spring meetings of the IMF and World Bank in Washington.

"Fiscal policy for example should remain flexible and growth-friendly, rebuild buffers, and strike the right chord between debt sustainability and supporting demand."

This week's proceedings kicked off with the IMF cutting its global growth outlook for the third time in six months. The world economy will likely grow 3.3 percent this year, the slowest expansion since 2016 and 0.2 percentage points below the global lender's estimate from January.

Major central banks including the US Federal Reserve have responded to the slowdown by putting policy-tightening efforts on hold. That has eased the pressures that global financial markets felt at the end of 2018, which contributed to the unwanted tightening of financial conditions partly blamed for the economic weakening.

Growth is projected to firm up in 2020, the IMF said, but some officials are worried the expected rebound will be threatened if the weakening in developed economies such as the United States, Japan and Europe worsens.

"Despite the expected improvement in global economic growth, if economic slowdowns in major economies feed into other economies, the prospects for growth might deteriorate, bringing uncertainty across the entire global economy," Japanese Finance Minister Taro Aso said in his statement to the IMF committee.

There is some cause for optimism. In Europe, many of the global factors weighing on growth appear to be waning, keeping alive expectations for a recovery in the second half of the year, European Central Bank President Mario Draghi said at a separate press conference.

But he also warned that factors that undermine confidence, including the risk of a hard Brexit and a global trade war, continue to "loom large," putting growth at risk. - REUTERS

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