Published: Thu, October 11, 2018
Markets | By Jeffery Armstrong

International Monetary Fund downgrades outlook for world economy to 3.7% growth

International Monetary Fund downgrades outlook for world economy to 3.7% growth

It had previously predicted jobless rates of 5.5% and 5.2% respectively. However, since December 2017, dollar has gone up to Rs138. The move gave the People's Bank of China more control over the currency's value and allowed it to halt its slide.

The IMF said higher trade barriers could disrupt global supply chains, slow the spread of technology and ultimately lower global productivity and welfare. The official gave no clue as to what the report might conclude about Chinese foreign exchange policies.

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. Meanwhile friendly countries are being approached to deposit funds in the State Bank to boost reserves. Meanwhile, Pakistan would have to repay $1.2 billion in next couple of months (October and November), which would further erode the reserves.

Even though Indonesia is not included in the International Monetary Fund list of most vulnerable economies (Argentina, Brazil, South Africa and Turkey), as its economic fundamentals and its financial sector stability are now much stronger than during the 1998 Asian economic crisis and the 2008 global financial crisis, it is by no means a time for complacency.

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The risks of a government funding crisis in Italy, where the country's banks are under pressure, is also highlighted.

Separately, the ministry said in a statement that the government, after taking into account the current situation and consultation with the leading economists, chose to approach the International Monetary Fund for stabilisation and an "economic recovery program".

The IMF-World Bank meeting is an annual summit to discuss global financial and economic issues, including global economic outlook, poverty eradication, and aid effectiveness.

But the United States organisation's study stresses that despite the Brexit uncertainty, banks are still safer now than they were in 2008 after the financial crisis. Washington said on Friday it was considering waivers for nations that were reducing imports of Iranian oil.

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"These challenges call for urgent reforms", he said.

"Trade deficits don't (necessarily) mean cheating by the other side".

He said that massive devaluation of rupee will reignite high inflation and halt growth by hitting all the important sectors of economy.

Obstfeld made the remarks at a press briefing during the Fund's annual meetings held at the resort island of Bali in Indonesia, according to a wire service.

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"We will be listening very, very attentively when and if they come to us", said Obstfeld. It does not meet the second condition of running a current-account surplus of at least 3 per cent of its gross domestic product. The last time was in 2013, when Islamabad got a $6.6 billion loan to tackle an economic crisis.

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