Win­dow of op­por­tu­nity ‘nar­row­ing’ for global econ­omy, warns IMF

Gulf Times Business - - BUSINESS - AFP Nusa Dua,

The win­dow of op­por­tu­nity for safe­guard­ing global growth is “nar­row­ing” as trade dis­putes deepen and emerg­ing mar­kets face fis­cal cri­sis, the IMF said yes­ter­day, warn­ing coun­tries against wors­en­ing things by weapon­is­ing cur­rency and in­ter­est-rate poli­cies.

US Trea­sury Sec­re­tary Steven Mnuchin had down­played the global con­cerns ex­pressed at an In­ter­na­tional Mone­tary Fund meet­ing held this week in Bali un­der the shadow of US-China ten­sions, say­ing the world would ben­e­fit if Bei­jing is forced to changes its trade poli­cies.

But the IMF said in a com­mu­nique that while global growth cur­rently re­mained “steady”, the risks are “in­creas­ingly skewed to the down­side amid height­ened trade ten­sions and on­go­ing geopo­lit­i­cal con­cerns”. The Fund kicked off its an­nual meet­ing with the World Bank on the In­done­sian re­sort is­land ear­lier in the week in a gloomy mood, pre­oc­cu­pied by the trade tus­sle be­tween the world’s two big­gest economies, and tight­en­ing fi­nan­cial con­di­tions faced by emerg­ing mar­kets.

On Tues­day, it cut its out­look for global GDP growth by 0.2 per­cent­age points to 3.7% for 2018 and 2019, cit­ing the trade war.

“The win­dow of op­por­tu­nity (is) nar­row­ing,” the 189-coun­try or­gan­i­sa­tion said, adding that mem­bers would “re­frain from com­pet­i­tive (cur­rency) de­val­u­a­tions and will not tar­get our ex­change rates for com­pet­i­tive pur­poses” — a line ap­par­ently aimed at the US and China.

Mnuchin this week said he had told the head of China’s cen­tral bank about his con­cerns over the weak­ness of its cur­rency. US Pres­i­dent Don­ald Trump has ac­cused Bei­jing of de­pre­ci­at­ing its cur­rency to ab­sorb the im­pact of US trade tar­iffs.

But Mnuchin, speak­ing on the Bali meet­ing’s side­lines, de­clined to com­ment on whether Wash­ing­ton would de- clare Bei­jing a “cur­rency ma­nip­u­la­tor” in a Trea­sury re­port due out next week.

That would be a first for China, trig­ger­ing a process that could lead to puni­tive steps. Mnuchin also pushed back against the grow­ing global angst over the US-China trade fight, say­ing that pres­sur­ing Bei­jing into adopt­ing more open trade poli­cies would be good for all.

“Our ob­jec­tive with China is very clear: it’s to have a more bal­anced trad­ing re­la­tion­ship,” he said.

“I think that if we are suc­cess­ful, this is very good for US com­pa­nies, US work­ers, Euro­peans, Ja­pan, all of our other al­lies, and good for China.”

The ar­gu­ment gained lit­tle trac­tion in Bali yes­ter­day. “Trade con­flict would be bad for all economies, not just the US and China,” Ja­panese cen­tral bank gov­er­nor Haruhiko Kuroda said. “This type of thing will not be good for the US econ­omy, the China econ­omy, but also for the economies of Asia and the world.” Ten­sions have soared re­cently with Trump’s ad­min­is­tra­tion rolling out bil­lions of dol­lars in tar­iffs against China in a bid to tackle its trade deficit and rein in what Wash­ing­ton con­sid­ers un­ac­cept­able Chi­nese trade prac­tices.

Mnuchin said Wash­ing­ton’s ul­ti­mate goal was a “free, fair and re­cip­ro­cal re­la­tion­ship” with Bei­jing.

At­ten­tion has be­gun to turn to­ward hopes that Trump and Chi­nese Pres­i­dent Xi Jin­ping could meet on the side­lines of the G20 sum­mit next month in Ar­gentina and bury the hatchet with some sort of agree­ment. Mnuchin said no de­ci­sion had been made yet and the US was not — “for the mo­ment” — re­quir­ing any Chi­nese con­ces­sions be­fore Trump agrees to a meet­ing. “To the ex­tent that we can make progress to­ward a meet­ing, I would en­cour­age that and that’s some­thing we are hav­ing dis­cus­sions about,” he told re­porters.

World mar­kets also have been roiled by a plunge in some emerg­ing mar­ket cur­ren­cies — in­clud­ing Turkey and Ar­gentina — as do­mes­tic fi­nan­cial crises and higher US in­ter­est rates lure re­turn­shun­gry in­vestors to the dol­lar.

The IMF state­ment said it would push to im­prove the World Trade Or­gan­i­sa­tion and boost con­fi­dence in the global trad­ing sys­tem.

It added that it would con­tinue to help coun­tries deal with the so­cial and eco­nomic costs of “pan­demics, cy­ber risks, cli­mate change and nat­u­ral dis­as­ters, en­ergy scarcity, con­flicts, mi­gra­tion, and refugee and other hu­man­i­tar­ian crises”.

The head­quar­ters of the In­ter­na­tional Mone­tary Fund in Wash­ing­ton, DC. The win­dow of op­por­tu­nity for safe­guard­ing global growth is “nar­row­ing” as trade dis­putes deepen and emerg­ing mar­kets face fis­cal cri­sis, the IMF said yes­ter­day, warn­ing coun­tries against wors­en­ing things by weapon­is­ing cur­rency and in­ter­est-rate poli­cies.

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