International Monetary Fund projects India growth at 7.3% in 2018

PM Imran Khan chairing the Punjab cabinet meeting. — PTI

IMF DOWNGRADE: The International Monetary Fund revised its outlook for the world economy, citing rising interest rates and growing tensions over trade.

"Historically, Pakistan has achieved 3 to 3.5 percent growth rate in the first two to three years whenever we availed the International Monetary Fund program", Aslam said, adding: "It would be a big achievement if we maintain growth at 3.5 percent". "Risks to global growth skew to the downside in a context of elevated policy uncertainty".

The IMF said its forecast for investment growth for FY19 is weaker than in April, despite higher capital spending in India, on account of contracting investment in economies under stress, such as Argentina and Turkey, which is also reflected in a downward revision for import growth.

The report also amplified worries about worldwide trade, echoing numerous earlier IMF statements, but noted that trade tensions have thus far affected individual sectors more directly than the financial system.

The IMF has lowered its forecast for global growth this year and next.

It left 2018 growth forecasts for the two countries unchanged at 2.9 percent for the United States and 6.6 percent for China.

The IMF also noted the Bangko Sentral ng Pilipinas's (BSP) move to raise policy rates in recent months as headline inflation has risen and the local currency has come under pressure. It also listed risks such as higher oil prices, global trade tension and the impact of higher USA interest rates and volatile capital flows on borrowing costs over the short term.

In particular, the BSP said inflation is now expected to average 5.2 percent, from the 4.9-percent projection in the previous meeting on August 9.

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This comes after the Government also revived upwards growth projection for this year, saying the economy is showing signs of recovery despite a number of challenges and risks. Emerging Asia includes ASEAN 5 countries plus China and India.

The report says that outflows could hit $US100 billion over a year, about 0.6 percent of emerging market economies' gross national income.

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".

The growth rate of United States for 2018 is 2.9 per cent and that of 2019 has been powered to 2.5 per cent.

The region's slower growth next year mirrors the global growth's similar softening over the medium term.

Emerging Asia continued to register strong growth, supported by a domestic demand-led pickup in the Indian economy from a four-year-low pace of expansion in 2017, even as activity in China moderated in the second quarter in response to regulatory tightening of the property sector and non-bank financial intermediation, it said.

"Last April, the world economy's broad-based momentum led us to project a 3.9 per cent growth rate for both this year and next", IMF Chief Economist Maurice Obstfeld said.

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