Trade wars are not the answer to the world’s problems

After a brief lull, the combined GCC economy is expected to do well over the next three years. The International Monetary Fund has sounded caution for developed countries, but raised the growth forecast for the UAE and GCC, which is encouraging. Rising crude prices are driving the economic engines faster in the region. But the economy is also well supported by sustained rise in non-oil activity and increased government spending. The UAE is expected to grow at 2.9 per cent in 2018, compared with the earlier estimates of about 2 per cent. In 2019, the growth is expected at 3.7 per cent compared with 3.04 per cent stated earlier. The positive numbers reflect the structured approach of the government and reforms announced recently. From visa changes, to taking steps to make the business environment more conducive for trade, the government’s approach has paid off.

While the IMF numbers are encouraging for the region, the fund did not mince words on the state of world economy. It has highlighted that there are risks lurking in a benign economic environment. Growth in most developed countries is supported by increasingly flawed policies and global cooperation is being undermined by nationalist populism. The fund used unusually stern words for the policies pursued by the United States and has suggested reversing tariffs imposed by the Trump administration. It has warned that if the trade war continues, growth could be hurt in the long term. The fund is right in saying that developed countries might be “building buffers for the next downturn” if they continued to keep interest rates low. A strong dollar and rising prices of oil are already putting pressure on emerging economies. China’s debt burden is also an issue which could reach boiling point. Disagreements between US and China are weighing down the system and we are at the end of equitable global growth where bleak economic conditions in one part of the world could hurt the other despite positive forecasts by the IMF. Countries must, therefore, come together before things get out of hand.