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 Factors affecting Global Economy

Mains-GS-3-Economic Development

1. Recent meeting of the International Monetary Fund (IMF) and World Bank, Finance Ministers and central bank Governors played down fears about a slowing global economy.

2. Optimism was based on the pause in the U.S.’s interest rate policy, ease in the trade tensions between U.S-China and receding risk of a hard Brexit.

3. IMF has consistently emphasized a cautious stance on the current growth trajectory.

4. Ultra-low interest rates of the post-crisis years have come to stay in many economies.

5. IMF has highlighted the limits of monetary policy in a future downturn.

6. Latest economic forecast cuts the outlook for growth in 2019 to 3.3%.

Issues of concern

1. Trade protectionism and the flight of capital from vulnerable emerging economies.

2. Deteriorating trade climate of the last two years. The pace of exports and imports was 4.6% in 2017. But the 2018 figures were a modest 3%.

3. Trade friction between the U.S. and China.

4. Growing uncertainty over Britain’s exit from the European Union.

Future prospects

1. IMF forecasts growth to touch 3.6% in 2020, lower than the earlier estimates.

2. That would be underpinned by tepid growth in the advanced world and hopes of a stable Chinese environment.

3. Potential for an acceleration depends on Argentina and Turkey climbing out of a recession and a rebound in other emerging and developing economies.

4. Lasting resolution of the U.S.-China trade dispute would revive momentum in the global economy.

Source: The Hindu