Major cracks in global econ­omy closer than an­tic­i­pated, says IMF

The Daily Telegraph - Business - - Front Page - By Anna Isaac

THE In­ter­na­tional Mone­tary Fund is­sued a stark warn­ing on the future health of the global econ­omy, say­ing major cracks were now “closer” than it had an­tic­i­pated and that growth will soon “fade”.

In a highly neg­a­tive speech Mit­suhiro Fu­ru­sawa, deputy man­ag­ing di­rec­tor of the world’s lender of last re­sort, said that the out­look for the global econ­omy had wors­ened. It was cur­rently en­joy­ing its best run of growth since the 2009 fi­nan­cial cri­sis, but there were “risks loom­ing on the hori­zon that could de­rail this re­cov­ery”, Mr Fu­ru­sawa said.

He added: “Some of these risks are now closer than we had an­tic­i­pated, in­ject­ing new ur­gency on pol­icy ac­tions to sus­tain the mo­men­tum and re­silience of the global econ­omy.”

The rate of growth would “fade” as the im­pact of money in­vested via tax cuts in the US and via in­vest­ment in China wears off. It would also start to weaken “as in­ter­est rates rise and fi­nan­cial con­di­tions tighten with mone­tary pol­icy nor­mal­i­sa­tion by major cen­tral banks”.

There was also a warn­ing sounded about the im­pact of an emer­gent trade war be­tween the US and China.

Mr Fu­ru­sawa said: “The prospect of trade re­stric­tions threat­ens to un­der­mine con­fi­dence and de­rail global growth per­ma­nently.”

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