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May 30, 2018

Global Economy: Protectionism cloud over global growth

  • Trade tensions between the United States (US) and China remained high in March- April. S&P Global estimates that the tariff spat would shave off 10 basis points from the US gross domestic product (GDP) in 2018 and 2019
  • For the first time in 13 months, China posted a trade deficit in March of $5 billion as exports fell while imports posted double-digit growth, reflecting strong domestic demand
  • Shrinking inventories coupled with geopolitical uncertainties in oil-producing nations took crude prices beyond the psychological threshold of $70 per barrel in April

The International Monetary Fund’s (IMF) April update of the World Economic Outlook underlines the broad transnational revival in growth and expects the expansion to continue. What’s notable is the IMF expects global growth to tick up to 3.9% in 2018 and 2019, supported by strong growth momentum in both, advanced economies and emerging market and developing economies (EMDEs). Advanced economies will likely continue expanding above their potential growth rate in the two years. Growth in EMDEs would firm up further with continued strong performance in emerging Asia and Europe and a modest upswing in commodity exports after three years of weak performance. However, the IMF flagged several downside risks to its forecast, which include protectionist sentiments that harm international trade, geopolitical tensions, and sharp tightening of global financial conditions.