Trade disputes over import tariffs introduced by the United States and high debt in countries around the world have put the brakes on economic growth worldwide, the International Monetary Fund (IMF) said
Trade disputes over import tariffs introduced by the United States and high debt in countries around the world have put the brakes on economic growth worldwide, the International Monetary Fund (IMF) said. PIX: Daniel Bockwoldt/dpa

Trade disputes over import tariffs introduced by the United States and high debt in countries around the world have put the brakes on economic growth worldwide, the International Monetary Fund (IMF) said on Tuesday.

Releasing its latest survey of the world economy, the IMF said that growth this year would remain steady at 3.7 per cent, and stay at the same level next year.

This downgrades its forecast issued in April of 3.9 per cent.

“That number now appears overoptimistic,” said the organization’s chief economist Maury Obstfeld.

“Rather than rising, growth has plateaued at 3.7 per cent. There are clouds on the horizon,” he said at a press conference marking the release of the closely-watched report.

The economic growth for the world’s top two economies, the United States and China, was also downgraded by the IMF.

Obstfeld mentioned the lack of legislative approval for trade deals between the US, Mexico and Canada, as well as the departure of Britain from the European Union as key areas of uncertainty.

“US tariffs on China and, more broadly, on auto and auto part imports may disrupt established supply chains, especially if met by retaliation,” he added.

“Growth is being supported by policies that seem unsustainable over the longer term,” he said. “These concerns raise the urgency for policymakers to act.”

When it came to debt, Obstfeld said that “the high levels of corporate and sovereign debt built up over years of easy global financial conditions … constitute a potential fault line.”

Gian Maria Milesi Ferretti, the deputy director of the IMF research department, highlighted the case of Brazil.

“The key policy issue facing Brazil is high public debt and the high burden of pension spending, early retirement,” he said.

Emerging economies would be hit harder by the slowdown than what the IMF referred to as advanced economies, for example in Europe and the United States.

Growth in advanced economies was downgraded by 0.1 percentage points compared to earlier estimates. For emerging markets and developing economies the figures were 0.2 percentage points and 0.4 percentage points respectively.

“There is no denying that the susceptibility to large global shocks has risen,” said Obstfeld, who at 66 is set to leave his post as chief economist at the end of the year. -DPA

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