Geopolitical fragmentation could cut global GDP by 2 percent: IMF

WASHINGTON - Growing geopolitical fragmentation around the world, including the US-China trade war and the Russian invasion of Ukraine, could cut global output by two percent over the long run, the International Monetary Fund said.

Research by the IMF found that growing geopolitical tensions were causing a reallocation of foreign direct investment (FDI) away from countries that were geographically close and towards those that were geopolitically close, like the United States and Europe.

This reallocation of FDI has the potential to cause serious damage to emerging market economies, the IMF said, since they are more reliant on inflows of investment from more geopolitically distant countries.

"In general, a fragmented world is likely to be a poorer one," IMF officials wrote in a blog post published Wednesday to accompany the research.

Policymakers "should carefully balance the strategic motivations behind reshoring and friend-shoring against economic costs to their own economies and the spillovers to others," the IMF officials wrote, adding that it was "crucial" to try and foster greater global integration.

The IMF also published research on Wednesday outlining the impact to the banking sector of geopolitical fragmentation, highlighting the cost to Russia and its allies of the 2022 invasion of Ukraine.

"Cross-border banking and portfolio debt flows to Russia and its allies (countries that rejected the motion in the United Nations in March 2022 to condemn Russia’s war on Ukraine) have reversed sharply, with allocations falling by about 20 and 60 percent relative to prewar levels, respectively," IMF officials wrote in a blog post.

The report found that rising tensions between investing and recipient countries like the United States and China had reduced the overall bilateral cross-border allocation of portfolio investment and bank claims by around 15 percent.

Agence France-Presse

BoE intervenes as IMF criticises UK budget

LONDON - The Bank of England stepped in Wednesday to shore up market confidence after the International Monetary Fund criticised Britain's inflation-fighting budget.

Reacting to markets turmoil, the BoE announced it was temporarily buying up long-dated UK government bonds "to restore orderly market conditions".

However, the pound promptly slumped 1.7 percent to $1.0552.

The BoE intervention followed criticism Tuesday from the IMF, which argued that Britain's budget could increase inequality and worsen inflation.

Credit ratings agency Moody's also waded in overnight with a warning about soaring debt.

Finance minister Kwasi Kwarteng's big tax cuts and energy price freeze, aimed at boosting the UK's recession-threatened economy, appeared to have had the opposite effect as traders warn of ballooning debt to pay for the incentives.

Following last Friday's budget, UK government bond yields have soared and the pound hit a record low at $1.0350.

Critics added that Kwarteng's measures would benefit the rich more than the poorest, as millions of Britons suffer from a cost-of-living crisis.

"We have acted at speed to protect households and businesses through this winter and the next, following the unprecedented energy price rise," the Treasury said as it sought to defend itself.

"We are focused on growing the economy to raise living standards for everyone," it added, blaming sky-high oil, gas and electricity prices on Russia's invasion of Ukraine.

IMF ADVICE

In a highly unusual intervention, the IMF late Tuesday said it was "closely monitoring" developments and urged the government in London led by new Prime Minister Liz Truss to change tack.

The Fund added: "We understand that the sizable fiscal package announced aims at helping families and businesses deal with the energy shock and at boosting growth via tax cuts and supply measures.

"However, given elevated inflation pressures in many countries... we do not recommend large and untargeted fiscal packages at this juncture."

The IMF said the "UK measures will likely increase inequality" and stressed the importance of fiscal policy not working "at cross purposes to monetary policy".

Analysts warned that Britain's controversial measures could force the Bank of England to hike interest rates far higher than forecast.

"Expectations that there will be a super-size interest rate hike coming from the Bank of England to try and counter the government splurge on tax cuts and spending have increased," Hargreaves Lansdown analyst Susannah Streeter noted Wednesday.

Many central banks, including the BoE, are aggressively hiking interest rates in a bid to cool decades-high inflation. 

TAX CUTS 

In his budget, Chancellor of the Exchequer Kwarteng cut the highest rate of income tax and scrapped a cap of banker bonuses.

He also, however, announced a plan to lower income tax for all workers.

Conservative party head Truss appointed Kwarteng to replace Rishi Sunak, who reached the final two in the race to be prime minister.

Sunak had hit out strongly at Truss's promise of tax cuts, arguing that the UK priority was to first bring down the nation's inflation rate that stands at a near 40-year high of 9.9 percent. 

Moody's called Britain's new fiscal policy regime "credit negative", adding that a sustained confidence shock could "permanently" weaken its debt affordability.

Kwarteng has said he would wait until November 23 to outline plans on controlling government debt.

Agence France-Presse

IMF upgrades global growth outlook again as some COVID clouds begin to clear

The International Monetary Fund raised its outlook for global economic growth again on Tuesday, forecasting worldwide output would rise 6 percent this year, a rate unseen since the 1970s, thanks largely to the unprecedented policy responses to the COVID-19 pandemic.

That upgrade, from 5.5 percent less than three months ago, largely reflects a rapidly brightening outlook for the US economy, which the IMF now sees growing by 6.4 percent in 2021, the fastest since the early 1980s. That's up 1.3 percentage points from the IMF's 5.1 percent projection in late January and nearly double the rate it estimated in October.

The IMF forecast, if realized, would mark the fastest pace of global growth since 1976 but also comes off the steepest annual downturn of the post-war era last year as the pandemic brought commerce around the world to a near stand-still at times. The fund said the world economy contracted 3.3 percent in 2020, a modest upgrade from an estimated contraction of 3.5 percent in its January update.

The latest World Economic Outlook - released at the start of the IMF's and World Bank's spring meetings - reflects a dramatic divergence between the outlook for the United States and much of the rest of the world courtesy of another $1.9 trillion in pandemic relief spending recently enacted in Washington.

The outlooks for other advanced economy heavyweights, such as Germany, France and Japan, hardly improved at all since January. Nonetheless, with the heft of the US outlook improvement as the main driver, the IMF marked up its advanced economy growth estimate to 5.1 percent from 4.3 percent.

Forecasts for emerging market economies, while somewhat improved, took a back seat to their developed peers. The fund's outlook for EM economies rose by just 0.4 percentage point - half of the advanced economy mark-up - to 6.7 percent from the view in January.

"(M)ultispeed recoveries are under way in all regions and across income groups, linked to stark differences in the pace of vaccine rollout, the extent of economic policy support, and structural factors such as reliance on tourism," the IMF said in its report summary.

The United States economy this year will join China in regaining a level of gross domestic product that exceeds where it stood before the pandemic struck just over a year ago, the IMF said. China recaptured all of its lost growth by the end of 2020.

The IMF emphasized the high degree of uncertainty surrounding the outlook, and that improvements could easily be tripped up by any of several factors, with success against the pandemic topping the list.

"Greater progress with vaccinations can uplift the forecast, while new virus variants that evade vaccines can lead to a sharp downgrade," it said.

Another big risk centers around the persistence of accommodative policies, from the United States in particular. Long-term interest rates around the world have risen sharply since January, as market participants revise their expectations for how soon the US Federal Reserve begins to normalize its policy stance. 

(Reporting By Dan Burns; Editing by Andrea Ricci)

Agence France-Presse

COVID crisis sinks global economy in 2020, collapsing GDP 4.9 percent: IMF

WASHINGTON - The global coronavirus pandemic has sparked an economic "crisis like no other," sending world GDP plunging 4.9 percent this year and wiping out $12 trillion over two years, the IMF said Wednesday.

Worldwide business shutdowns destroyed hundreds of millions of jobs, and major economies in Europe face double-digit collapses.

The prospects for recovery post-pandemic -- like the forecasts themselves -- are steeped in "pervasive uncertainty" given the unpredictable path of the virus, the IMF said in its updated World Economic Outlook.

"The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast," the fund warned.

While businesses are reopening in many countries and China has seen a bigger rebound in activity than expected, a second wave of viral infections threatens the outlook, the report said.

World GDP is expected to rebound by just 5.4 percent in 2021, and only if all goes well, the IMF warned.

IMF chief economist Gita Gopinath said under current forecasts, the crisis will destroy $12 trillion over two years, and cautioned, "we are not out of the woods." 

"Substantial joint support from fiscal and monetary policy must continue for now," Gopinath said in a blog post.

The downturn is particularly damaging for low-income countries and households, and threatens to endanger the progress made on reducing extreme poverty, the Washington-based crisis lender said in its report.

The fund made drastic downward revisions to most of the April forecasts made in the early days of the pandemic, and IMF economists fear the coronavirus will leave lasting scars on employment, businesses and trade.

Hanging over the predictions is the bill for massive government stimulus plans, which were fueled by extremely low interest rates and likely prevented the recession from turning into a depression even as they created huge and ever-increasing debt levels.

The damage is nonetheless stunning, and more widespread than any downturn in recent decades. The recession in many major economies will be more than double that suffered during the global financial crisis in 2009, which came as major developing economies like China, India and Brazil were booming.

China will eke out growth of one percent this year, the only positive figure on the long list of key economies the IMF tracks.

The United States will shrink eight percent and Germany slightly less, while France, Italy, Spain and Britain will suffer double-digit contractions. Japan makes out a bit better with a drop of just 5.8 percent, according to the forecasts.

Mexico also will see a double-digit decline while Brazil just misses that mark, as does Argentina, which is in the middle of a massive debt crunch on top of its health and economic crises after the country once again defaulted on its foreign obligations.

The IMF pointed to International Labour Organization data estimating more than 300 million jobs were lost in the second quarter of the year.

The "sizeable" flood of government funds to support workers and businesses "have forestalled worse near-term losses," but the IMF urged countries to avoid a situation where aid is "prematurely withdrawn or improperly targeted" since that could worsen the economic damage.

"A more prolonged decline in activity could lead to further scarring, including from wider firm closures, as surviving firms hesitate to hire jobseekers after extended unemployment," the fund warned.

With transport and manufacturing shut down for weeks, the IMF projects global trade volume will collapse by just under 12 percent -- and advanced economies will see an even more dramatic drop.

The IMF also warned of dangers posed by eroding relations between and within countries.

"Beyond pandemic-related downside risks, escalating tensions between the United States and China on multiple fronts, frayed relationships among the Organization of the Petroleum Exporting Countries (OPEC+) coalition of oil producers and widespread social unrest pose additional challenges to the global economy," the report said.

Trade disruptions could undermine productivity as firms shift supply chains to try to protect themselves against future breakdowns, and companies also face higher costs as they adopt enhanced cleaning procedures and social distancing requirements.

Amid the uncertainty, there is a chance the recession could be less severe than forecast, the report said.

"Downside risks, however, remain significant," it warned.

Agence France-Presse

World faces worst crisis since Great Depression: IMF chief

WASHINGTON -- The global coronavirus pandemic has inflicted an economic crisis unlike any in the past century and will require a massive response to ensure recovery, IMF chief Kristalina Georgieva said Thursday.

The warnings about the damage inflicted by the virus already were stark, but Georgieva said the world should brace for "the worst economic fallout since the Great Depression."

With nearly 89,000 deaths in 192 countries and territories and the number of cases now surpassing 1.5 million worldwide, much of the global economy has been shut down to contain the spread of the virus.

The International Monetary Fund expects "global growth will turn sharply negative in 2020," with 170 of the fund's 180 members experiencing a decline in per capita income, Georgieva said.

Just a few months ago, the fund was expecting 160 countries to see rising per capita income, she said in a speech previewing next week's spring meetings of the IMF and World Bank, which will be held virtually due to the restrictions imposed due to the COVID-19.

'IT COULD GET WORSE'

Even in the best-case scenario, the IMF expects only a "partial recovery" next year, assuming the virus fades later in 2020, allowing normal business to resume as the lockdowns imposed to contain its spread are lifted.

But she added this ominous caution: "It could get worse."

There is "tremendous uncertainty around the outlook" and the duration of the pandemic, Georgieva said.

The IMF will release its latest World Economic Outlook on Tuesday, with grim forecasts for its members this year and next. In January, the IMF projected global growth of 3.3 percent this year and 3.4 percent in 2021.

But that was a different world.

The US economy has purged 17 million jobs since mid-March, with the latest weekly data issued Thursday showing 6.6 million workers filed for unemployment benefits, and economists projecting a double-digit jobless rate this month.

The World Bank said Thursday the pandemic might cause the first recession in Africa in 25 years.

Researchers at the Institute for International Finance (IIF), a global banking association, expect a 2.8 percent plunge in global GDP, compared to a decline of 2.1 percent in 2009 during the global financial crisis.

That is a sharp reversal from October, when the IIF predicted 2.6 percent growth.

Recovery depends on decisive actions now, Georgieva said. The IMF has $1 trillion in lending capacity and is responding to unprecedented calls from 90 countries for emergency financing.

SEND MORE LIFELINES

Countries already have taken steps worth a combined $8 trillion, but Georgieva urged governments to do more.

"Lifelines for households and businesses are imperative" to "avoid a scarring of the economy that would make the recovery so much more difficult."

The IMF board approved a doubling of emergency lending facilities that will provide about $100 billion, and is moving ahead with debt relief for the poorest countries and also help for countries with unsustainable debt levels.

"The bleak outlook applies to advanced and developing economies alike. This crisis knows no boundaries. Everybody hurts," Georgieva said.

She noted that about $100 billion in investments already had fled emerging markets -- more than three times the capital exodus seen in the 2008 global financial crisis.

US officials have scrambled to apply a tourniquet to stem the bleeding of jobs in the world's largest economy and keep the financial system from freezing up.

The Federal Reserve rolled out another series of lending programs Thursday totaling $2.3 trillion to help small and medium businesses as well as state and local governments facing cash shortages.

The US is moving "with alarming speed" from unemployment near a 50-year low, to a "very high" rate, Fed chair Jerome Powell said in a speech Thursday.

And like Georgieva, he indicated the US government will have to provide more direct support, since the Fed is limited to lending to solvent entities.

"All of us are affected, but the burdens are falling most heavily on those least able to carry them," Powell said.

But he also tried to offer some reassurance, saying the US economic rebound could be "robust."

Agence France-Presse

COVID-19 cases and deaths rising, debt relief needed for poorest nations: WHO

GENEVA -- The head of the World Health Organization voiced deep concern on Wednesday about the rapid escalation and global spread of COVID-19 cases from the new coronavirus, which has now reached 205 countries and territories.

WHO Director-General Tedros Adhanom Ghebreyesus said that his agency, the World Bank and the International Monetary Fund backed debt relief to help developing countries cope with the pandemic's social and economic consequences.

"In the past five weeks there has been a near-exponential growth in the number of new cases and the number of deaths has more than doubled in the past week," Tedros told a virtual news conference at the organization's Geneva headquarters.

"In the next few days we will reach 1 million confirmed cases and 50,000 deaths worldwide," he said.

China, where the coronavirus outbreak first emerged in December, reported dwindling new infections on Wednesday and disclosed for the first time the number of asymptomatic cases, which could complicate how trends in the outbreak are read.

Asked about the distinction, Dr. Maria ver Kerkhove, a WHO epidemiologist who was part of an international team that went to China in February, said the WHO's definition included laboratory-confirmed cases "regardless of the development of symptoms".

"From data that we have seen from China in particular, we know that individuals who are identified, who are listed as asymptomatic, about 75 percent of those actually go on to develop symptoms," she said, describing them as having been in a "pre-symptomatic phase". The new coronavirus causes the respiratory disease COVID-19.

The outbreak continues to be driven by people who show signs of disease including fever and cough, but it is important for the WHO to capture that "full spectrum of illness", she added.

Tedros praised India's $22.6 billion economic stimulus plan - announced after a 21-day lockdown imposed last week - to provide free food rations for 800 million disadvantaged people, cash transfers to 204 million poor women and free cooking gas for 80 million households for the next 3 months.

"Many developing countries will struggle to implement social welfare programs of this nature," he said.

"For those countries, debt relief is essential to enable them to take care of their people and avoid economic collapse. This is a call from the WHO, the World Bank and IMF - debt relief for developing countries," he said.

But debt relief processes are lengthy, Tedros said.

"What we are proposing together with the World Bank and IMF is an expedited process to support countries so their economies will not be getting into crisis and their communities will not be really getting into crisis," he said. 

source: news.abs-cbn.com

Global stocks, oil plunge as Fed virus move fails to ease fears

LONDON - Stock markets and oil prices went into freefall Monday as interest rate cuts and fresh stimulus measures by central banks failed to lift confidence, with analysts warning that the Federal Reserve may have reached the limits of its power to fend off recession as the coronavirus spreads.

Brent North Sea oil plunged more than ten percent to a four-year low, as a price war between major producers Saudi Arabia and Russia added to sliding crude demand caused by the virus.

The euro surged one percent against the dollar after the Fed on Sunday slashed borrowing costs to almost zero -- its second emergency cut in less than two weeks. 

The US central bank also unveiled a massive asset-buying programme, similar to measures put into place during the global financial crisis more than a decade ago.

The Bank of Japan joined in on Monday, saying it would ramp up its bond-buying programme.

New Zealand's central bank also slashed rates to record lows in an attempt to cushion the economic blow, while the People's Bank of China has injected vast sums into financial markets to ease liquidity worries.

In joint action coordinated with the European Central Bank, Bank of England, Bank of Japan, Bank of Canada and the Swiss National Bank, the Fed moved to counteract global "dollar funding pressures" according to its boss Jerome Powell.

But traders were left unimpressed, with the virus showing no sign of letting up, while the head of the World Health Organization chief Tedros Adhanom Ghebreyesus said it was impossible to tell when it would peak globally.

With G7 leaders set to hold crisis videoconference talks later Monday, IMF chief Kristalina Georgieva called Monday for global governments to work together to provide massive spending as in the 2008 financial crisis to help the economy withstand the damage from the coronavirus pandemic.

Trading was halted on Wall Street just after the opening bell, with the Dow dropping nearly 10 percent. 

In afternoon trading in Europe, Paris 10.7 percent, Milan 10.9 percent, Madrid 11.3 percent, Frankfurt 9.5 percent and London 7.9 percent.

Airlines and tourism groups were the biggest fallers after slashing capacity, with TUI down by nearly a third and British Airways-parent IAG crashing 28 percent.

The car sector also slid as carmakers Fiat Chrysler and Peugeot-Citroen said they were halting production.

"While these (central bank) moves may go some way to easing any potential blockages in the plumbing of the financial markets, they won't adequately compensate for the upcoming economic shocks that are about to come our way," said CMC Markets analyst Michael Hewson.

The scale of the crisis was laid bare by data showing Chinese industrial production for January and February shrank 13.5 percent, the first contraction in around 30 years.

Meanwhile, manufacturing activity in New York state fell to its lowest level since 2009, according to the New York Federal Reserve Bank's monthly industry survey.

Equity markets continue to be whipsawed by the disease, which has now infected almost 170,000 people and killed more than 6,000 with several countries going into lockdown as Europe becomes the new epicentre of the outbreak.

ASIA MELTDOWN

Sydney's stock market led losses in Asia-Pacific, tumbling 9.7 percent in its worst daily drop on record, while Manila shed nearly eight percent and Bangkok and Mumbai dropped more than five percent.

Hong Kong, Singapore, Taipei and Jakarta all lost more than four percent. Wellington and Seoul were more than three percent off.

Shanghai tumbled 3.4 percent after the release of the industrial production data, which came a week after news that Chinese exports had collapsed.

Tokyo ended 2.5 percent lower, after a rally sparked by the Bank of Japan's support measures announcement fizzled.

The broad retreat followed a tumultuous week that saw some stock markets suffer their worst days in decades and in some cases their worst ever.

And experts said there was a concern that the Fed might be running on empty with regards to further action.

Sunday's move "raises the question of whether the Fed has anything left in the tank should the spread of the virus not be contained", said Kerry Craig at JP Morgan Asset Management.

"Our view is that the drag on the services sector from social distancing policies and shock from the fall of the oil price on the energy sector will be enough to tip the US into recession, but not necessarily a long one."

source: news.abs-cbn.com

IMF to test working from home in case virus strikes

WASHINGTON — All International Monetary Fund employees will work from home on Friday, the fund said Monday, to test systems in case the spreading coronavirus epidemic makes working remotely a necessity.

The World Bank, too, has been testing remote work procedures on a smaller scale, a spokesman told AFP.

Last week, the IMF and World Bank announced that their Spring meetings in April would become a virtual event amid the spread of COVID-19 which has sickened 110,564 people in 100 countries and killed 3,862.

As more governments and companies are encouraging work from home to contain the virus, the IMF said in a statement it would for the first time conduct a "fund-wide remote work exercise," as part of its "crisis preparedness efforts and in preparation for the virtual spring meetings in April."

"This exercise will allow us to further strengthen the fund's readiness to continue its operations and serve its membership during these trying times," a spokesperson said.

The World Bank is meanwhile testing remote work "department by department," and already has a "number of systems in place" to ensure staff can work remotely, a spokesman said, speaking from his home kitchen.

The development lending institutions hold meetings twice per-year, attracting thousands of officials, journalists and private sector participants from 180 member countries -- just the kind of gathering health authorities say should be avoided amid the outbreak.

The outbreak has caused the cancellation or postponement of a number of events, including the ASEAN summit US President Donald Trump was scheduled to host later this month.

Finance ministers and central bank governors from 189 IMF and World Bank member countries attend the Spring and annual meetings, in April and October, which also include a host of side gatherings, panels, conferences and related events all around in Washington. The official participant count is about 10,000.

The World Bank spokesman said those side events will be skipped this year. Only the institutions' 2 steering committees will meet, the International Monetary and Financial Committee and the Development Committee, which involve only about 2-dozen officials.

The flagship event ahead of the meetings is the release of the IMF's World Economic Outlook, which will be in the spotlight given the warnings that global growth will slow notably due to the broadening epidemic.

Agence France-Presse 

IMF cuts euro zone growth forecasts, as Germany slows and Italy stalls

BRUSSELS - Euro zone economic growth is set to slow more than expected as the bloc's manufacturing crisis could spill over to the larger services sector under protracted global trade tensions, the International Monetary Fund said on Wednesday.

The IMF said the 19-country euro zone would grow by 1.2 percent this year, revising down its earlier estimates from April of 1.3 percent growth for the bloc. That is a significant slowdown compared to last year's 1.9 percent expansion.

The bloc's economy would grow by 1.4 percent in 2020 and 2021, the IMF said, cutting its previous estimate of 1.5 percent growth in both years.

The slowdown is mostly due to anaemic growth in Germany, the euro zone's largest economy, and stagnation in Italy, the third-biggest, the fund said, revising down its earlier forecasts for both countries.

Germany is now expected to grow by only 0.5 percent this year, slower than the 0.8 percent the IMF had predicted in April. That would be one-third of 2018 growth.

The IMF also cut its growth forecast for France, the bloc's second-largest economy, despite better-than-expected output estimates for the third quarter released last week. The country is now expected to grow by 1.2 percent this year, instead of the 1.3 percent previously forecast.

To counter the slowdown, the fund reiterated its call for a "synchronized fiscal response" by euro zone governments, in a clear message to Berlin to invest more.

It said the slowdown, so far mostly caused by the impact of global trade tensions on the bloc's export-driven industry, could spill over to services, the largest economic sector in the euro zone.

Britain's process to leave the European Union was also a cause of concern, with a no-deal Brexit causing vast negative effects on both Britain and the EU.

In the event of an orderly Brexit, which could occur by the end of January, the IMF confirmed its earlier estimates that Britain's economy would grow by 1.2% this year and 1.4 percent next. Growth was 1.4 percent in 2018.

Inflation in the bloc is expected by the IMF to be 1.2 percent this year, 1.4 percent next and 1.5 percent in 2021, short of the European Central Bank's target of a rate close but below 2 percent.

(Reporting by Francesco Guarascio @fraguarascio; Editing by Catherine Evans)

source: news.abs-cbn.com

APEC finance ministers express 'moderate' hope over US-China trade deal

SANTIAGO, Chile - APEC finance ministers expressed "moderate optimism" on Tuesday that the United States and China will end their trade war and sign an agreement during the forum's summit in Santiago next month.

For the last 18 months the world's 2 largest economies have been embroiled in a trade spat that saw tariffs placed on hundreds of billions of dollars' worth of goods.

US President Donald Trump announced a partial deal last week.

Treasury Secretary Steven Mnuchin added on Monday that US and Chinese officials would hold phone talks over the next 2 weeks to finalize the "phase one" trade deal.

Finance ministers and representatives of the Asia-Pacific Economic Cooperation (APEC) forum met in Santiago on Tuesday and discussed the possibility of a full trade deal being signed next month.

Chile's finance minister, Felipe Larrain, said such an agreement would be "highly significant."

While he was somewhat optimistic, he also he warned that "planning and good intentions and the idea to sign it are one thing. Actually signing it is another."

"Hence, in some there's this natural dose of skepticism."

Few specifics of the deal are known except that it covers intellectual property, financial services and currencies. Washington has also scrapped tariff increases planned for this week and could do so with others scheduled for December.

New Zealand's finance minister Grant Robertson warned against getting carried away, though.

"We also have to acknowledge that there is some way to go before this is fully resolved, but it is important for the whole world that this trade war is ended," he said.

The finance ministers are due to issue a joint statement backing free trade at the end of their meeting.

APEC is an inter-governmental forum made up of 21 economies that promotes free trade throughout the Asia-Pacific region.

Those economies make up 40 percent of the world's population, 60 percent of its gross domestic product and 50 percent of total trade, according to the Chile summit organizers.

The International Monetary Fund on Tuesday said the US-China trade war alone is estimated to shrink the world economy by 0.8 percent in 2020, but a truce would reduce that impact.

Policymakers should work to find resolutions to trade disputes, the IMF urged.

source: news.abs-cbn.com

IMF chief Georgieva tells women: Don't accept less!

WASHINGTON - Women around the world take on far more unpaid work than men but what they should never do is agree to a lower wage in the workplace, IMF chief Kristalina Georgieva said Tuesday.

She recounted her experience early in her career during the Soviet era, saying she did not know at the time she could bargain for better conditions.

To women of today she said: "Do not accept to be less paid than your colleague men, ever!"

The International Monetary Fund released a report on Tuesday which found that unpaid work "is a substantial part of economic activity that goes unmeasured and is shouldered disproportionally by women."

In fact, women do 2 hours more of unpaid work than men every day and even "in the most egalitarian countries in the world, women do at least 20 percent more unpaid work than men," notably chores around the home, the report said.

To address that issue, governments must invest in infrastructure, to provide water and electricity and internet access, but also provide services such as childcare and elder care, and improve education opportunities, to help women "replace unpaid work with paid work."

In more advanced economies, that means "implementing family-friendly policies such as parental leave and taxation of secondary earners, enhancing the efficiency of labor markets, and promoting flexible work arrangements."

But asked by one young woman how to achieve professional success, Georgieva offered no easy solutions:

"You have to be competent and to be more confident."

She also said quotas for hiring women in private firms were not a perfect solution "but it's pragmatic" since it could provide a faster path to gender equity in the workplace. Otherwise it will take a "very, very long time."

source: news.abs-cbn.com

IMF warns global outlook 'precarious,' no room for policy mistakes

WASHINGTON - The world economy is slowing to its weakest pace since the global financial crisis, as the US-China trade war undercuts business confidence and investment, the IMF said Tuesday.

It warned that the outlook is beset by risks, and urged policymakers to work to find resolutions to trade disputes, since there are limited tools to respond to a new crisis.

"With a synchronized slowdown and uncertain recovery, the global outlook remains precarious," International Monetary Fund chief economist Gita Gopinath said in her introduction to the latest forecasts.

The IMF for the past year has every three months cut projected growth for 2019 as trade conflicts worsened.

In its latest World Economic Outlook it trimmed the estimate by another two-tenths, to 3.0 percent. The report also lowered the 2020 forecast by a tenth to 3.4 percent. 

"At three percent growth, there is no room for policy mistakes and an urgent need for policymakers to cooperatively deescalate trade and geopolitical tensions," Gopinath said.

In addition, the trade conflicts and a slowdown in auto sales worldwide means trade growth has slowed sharply, falling in the first half of the year to its weakest since 2012, with an estimated increase of just 1.1 percent this year after a 3.6 percent jump in 2018.

RUNNING LOW ON AMMO

While the US economy also has been hit by uncertainty -- largely created by President Donald Trump's trade offensive -- the world's largest economy remains a bright spot on the global stage, the report said.

After upgrading its US outlook in July, the latest WEO reversed course, and cutting the US forecast this year to 2.4 percent -- still above trend, but two-tenths below the July forecast.

In 2020, the IMF projects US GDP to expand by 2.1 percent, unchanged from the prior report.

"For the United States, trade-related uncertainty has had negative effects on investment, but employment and consumption continue to be robust, buoyed also by policy stimulus," Gopinath said.

Major central banks have taken steps to soften the blow to growth by lowering interest rates, without which the downturn would have been worse, she said. 

However, she cautioned that monetary policy "cannot be the only game in town" and governments, notably in countries like Germany, should take advantage of low rates to make investments to support growth.

"With central banks having to spend limited ammunition to offset policy mistakes, they may have little left when the economy is in a tougher spot," Gopinath warned.

The US-China trade war alone is estimated to shrink the world economy by 0.8 percent in 2020, the IMF said.

The fund warned that risks to the outlook predominate, and the uncertainty around trade policy -- which causes businesses to hold off on investments and undermines confidence -- will take a larger chunk out of growth than the tariffs themselves

SLOWING AUTO SALES

"To forestall such an outcome, policies should decisively aim at defusing trade tensions, reinvigorating multilateral cooperation, and providing timely support to economic activity where needed," the report said.

But trade is not the only reason for the global slowdown: the report notes that in China's economy, for example, growth is moderating as intended amid slowing domestic demand.

Other major economies like Brazil, India, Mexico, Russia and South Africa are slowing this year due to "idiosyncratic reasons" but are expected to recover in 2020.

"A notable feature of the sluggish growth in 2019 is the sharp and geographically broad-based slowdown in manufacturing and global trade," the IMF said, which in addition to the higher tariffs and trade uncertainty is the result of the contracting auto industry. 

That slowdown has had an impact in Germany, China and India, the report said.

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To save climate, tax carbon at $75 per ton: IMF

WASHINGTON — The world's biggest carbon polluting nations should jointly agree to tax emissions at $75 per ton in the next decade to keep climate change at safe levels, the International Monetary Fund said Thursday.

The global crisis lender's call for immediate action confronts a policy dilemma that has left major economies rife with discord in recent years as they battle to prevent catastrophic warming of the planet.

"Carbon taxes are the most powerful and efficient tools but only if they are implemented in a fair and growth-friendly way," IMF researchers said in a blog post.

After violent protests last year, France suspended plans to raise carbon taxes beyond $50 per ton. Meanwhile, US President Donald Trump has moved to withdraw the United States from the 2015 Paris Agreement and some American lawmakers have advanced a "Green New Deal" to invest in de-carbonizing the economy.

The report was released ahead of next week's annual meetings of the IMF and World Bank at which newly installed IMF Managing Director Kristalina Georgieva is expected to urge member countries to action.

A COMMON APPROACH

Taxing emissions -- raising the cost of carbon-intensive energy for electricity, travel, manufacturing, shipping and food -- is the most efficient way to prevent global average temperatures from rising more than 2 degrees Celsius (3.6 Fahrenheit) above pre-industrial levels, the goal set in the Paris accord, according to the IMF research published Thursday.

While the current global average cost is $2 per ton, a coordinated increase to $75 by 2030 among the largest emitters in the Group of 20 economies would be the most likely to succeed.

A common approach would prevent "free-rider" countries from benefiting from reforms made by other nations and allow industries within countries to remain competitive with those in other nations, the report said.

But IMF researchers acknowledge the daunting and unequal costs this could impose.

Coal prices would more than triple. Electricity would shoot up by more than 30 percent in Canada and by between 70 and 90 percent in Australia. Gasoline prices would rise by between five and 15 percent in most countries, according to the report.

But environmental benefits would more than offset such costs -- by 2030, a $75 per ton tax would prevent an estimated 725,000 premature air pollution deaths, mainly in China, according to the report.

And consumers and firms eager to keep costs will have an immediate incentive to avoid emissions and invest in cleaner energy.

Tax revenues could be used to make such changes politically acceptable: targeted assistance to poor and vulnerable households, displaced workers and regions hit disproportionately by the transition.

Offsetting cuts to payroll and income taxes, combined with dividends to the public, could make the transition more politically palatable, the report said.

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Zimbabwe inflation soars to nearly 300%: IMF

Zimbabwe's annual inflation rate soared to nearly 300 percent in August spurred mainly by a collapsing currency, the International Monetary Fund (IMF) said Thursday after a mission to the crisis-weary country.

In a statement, the IMF said year-on-year inflation "reached almost 300 percent in August".

The local currency has fallen from parity against the American dollar to 16.5 Zimbabwean dollars (ZWL) per US dollar following currency reforms introduced in February in a bid to solve a chronic monetary crisis.

In June, inflation had stood at 176 percent.

The latest estimates are stoking fears of a return of the kind of hyperinflation that wiped out savings 10 years ago when the economy collapsed and prices of goods and services skyrocketed every week.

Early last month Finance Minister Mthuli Ncube said the government would stop publishing inflation figures until February next year to allow the statistics agency to collect fresh data using the new currency since prices were no longer pegged in US dollars.

The US dollar had been the national currency since 2009 when the country trashed its own currency following hyperinflation of as much as 500 billion percent.

But in June, Zimbabwe ended the use of US dollars and other foreign currencies and replaced them by two local parallel currencies -- "bond notes" and electronic RTGS dollars.

After its two-week mission, the IMF team concluded that the southern African country remains in "economic difficulties" which have been "exacerbated by severe weather shocks".

"GDP growth in 2019 is expected to be steeply negative, as the effects of drought on agricultural production and electricity generation, impact of cyclone Idai, and the significant fiscal consolidation to correct past excesses serve to drag on growth," it said in a statement.

It said that social conditions had "deteriorated sharply", with more than half of the country's population unlikely to be able to feed itself adequately between now and the next harvest season in the first half of 2020.

"Weakening confidence, policy uncertainty, a continuation of FX market distortions, and a recent expansionary monetary stance" had increased pressure on the exchange rate, it said. 

President Emmerson Mnangagwa, on taking over from Robert Mugabe, promised to revive the economy and declared Zimbabwe "open for business".

But nearly two years later, the economy is floundering and many Zimbabweans say they are worse off than they were under Mugabe.

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Global equities rout deepens as US sets crosshairs on yuan

TOKYO - Global stocks extended already substantial losses on Tuesday, after Washington tagged China a currency manipulator, shaking fragile investor sentiment in a rapid escalation of the US-China trade war.

Safe-haven assets, including bonds and some currencies such as the yen and Swiss franc, benefited as investors scurried to avoid risk.

In early European trade, the pan-region Euro Stoxx 50 futures were down 0.2 percent, German DAX futures slipped 0.15 percent and Britain's FTSE futures lost 0.4 percent.

US Treasury Secretary Steven Mnuchin said on Monday the government had determined that China is manipulating its currency, and that Washington would engage the International Monetary Fund to eliminate unfair competition from Beijing.

"Officially labeling China a currency manipulator gives the United States a legitimate reason to take even more steps," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

"The markets are now scrambling to factor in the possibility of the United States imposing not only an additional 10 percent of tariffs on Chinese imports, but the figure being raised to 25 percent. This is likely to be a protracted trade war without a quick resolution."

US President Donald Trump vowed last week to impose a 10 percent tariff on $300 billion of Chinese imports from Sept. 1, adding that it can be raised beyond 25 percent. Some economists reckon the global economy could slip into recession in the coming months if the tariff is increased to 25 percent.

The Trump administration's dramatic move against China hastened the risk aversion seen in global markets this week. On Monday, China let the yuan slide in response to the latest US tariffs, which are expected to further aggravate trade tensions between the world's two largest economies.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.75 percent after brushing its lowest since January. It has lost 3.7 percent so far this week.

The Shanghai Composite Index retreated 1.4 percent.

Japan's Nikkei shed 0.7 percent, Australian stocks fell 2.3 percent and South Korea's KOSPI slid 0.9 percent.

"Hedge funds and other speculators who have bet on stocks have not finished closing down their positions yet. There will likely be another wave of selling in stocks," said Masanori Takada, cross asset strategist at Nomura Securities.

"The sudden surge in volatility is likely to prompt risk parity players to pull out possibly up to $20 billion from global stocks and buy bonds."

YUAN'S SLIDE STALLS

The onshore Chinese yuan fell to an 11-year low early on Tuesday, brushing 7.0699 per dollar.

In a symbolic move, Beijing let the yuan breach 7-per-dollar on Monday for the first time since late 2008. But the Chinese central bank's mid-point fixing on Tuesday of 6.9683 was firmer than market expectations, and the yuan's retreat slowed.

China's offshore yuan stretched the previous day's slide, and briefly weakened to 7.1382, the lowest since international trading in the Chinese currency began in 2010. But it pulled back to 7.0469 after Beijing's firmer-than-expected yuan fixing on Tuesday.

The Japanese yen, a perceived safe-haven in times of market turmoil and political tensions, touched a seven-month high of 105.520 per dollar before dropping back to 106.700 in volatile trade.

The Swiss franc, another currency sought in times of turmoil, has gained roughly 1 percent against the dollar this week. It set a six-week peak of 0.9700 franc per dollar.

Investor demand for other safe-havens such government bonds also remained high as risk aversion gathered momentum.

The 10-year US Treasury yield extended sharp falls overnight and declined to 1.672 percent, its lowest since October 2016.

Japan's 10-year yield fell to a three-year trough of minus 0.215 percent.

Brent crude oil futures plumbed a seven-month low of $59.07 per barrel as the trade war raised concerns about lower demand for commodities. Brent last traded at $60.41 for a gain of 1 percent as bargain hunting kicked in.

Spot gold advanced to a six-year peak of $1,474.80 an ounce as investors sought the safety of the precious metal.

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IMF/World Bank: 75 years as the world's financial firefighters

WASHINGTON -- At the critical moment of a Hollywood movie starring A-lister Sandra Bullock, Bolivia's newly elected president calls in the International Monetary Fund (IMF) to bail out the poverty-stricken country, violating a campaign promise. 

The streets erupt in violent protest.

The movie, "Our Brand is Crisis," is a fictionalized version of the 2002 Bolivian elections and it drastically simplified the situation. But the writers knew the IMF would be unquestionably accepted as the arch enemy of the people.

After 75 years putting out financial fires around the world, the IMF and World Bank face criticism for repeatedly failing to prevent crises and for making things worse for the people they were meant to help.

That makes them easy scapegoats.

Even if the criticism is not always entirely fair -- no one blames the doctor for prescribing a painful but life-saving treatment -- the institutions have been trying to rebrand themselves in recent years, putting more emphasis publicly on protecting vulnerable members of society in their lending programs.

But they will need more than a better communications strategy as they contend with a wave of anti-globalization sentiment and technological transformation -- while also helping Africa through a transition requiring massive investment in infrastructure and job creation just to keep up with population growth.

The challenges "are huge," World Bank president David Malpass told AFP in an interview.

The IMF and World Bank were created July 22, 1944 in the shadow of World War II to help rebuild Europe and later Japan, and to try to head off the kind of economic strife that had led to the war.

"The original concept of reconstruction and development ... was clarified to include poverty alleviation as the bank grew," Malpass said.

Dismal record

On the surface, their record, especially for the IMF, seems dismal, with each of the prior three decades marked by a severe crisis: the Latin American debt crisis in the 1980s, the Asian and Russian crises in the 1990s and the global financial crisis in 2007, which begat the Great Recession that still looms over the world economy today.

In each case, the damage lasted for a decade or more and the IMF was blamed for inflicting even more pain with its rigid demands and policy advice that, according to the fund's harshest critics, too often favored corporate interests in the rich countries over the poor nations in trouble.

But at the same time extreme poverty has plummeted worldwide -- falling by a billion people since 1990.

"In the history of the world there has never been so much progress in improving people's lives as we have seen in the last 75 years," said Masood Ahmed, who worked alternately either at the IMF or World Bank for nearly half their existences.

But the institutions missed the problems growing beneath the surface. 

The world "was doing so well on the macro level, and there were so many people being lifted out of poverty, that we glossed over the fact that there were many people who were increasingly uncomfortable with the pace of change," said Ahmed, who leads the Center for Global Development, an anti-poverty research organization.

"And I think we're paying a bit of a price for that now."

Without prompting, Malpass volunteered criticism of the "Washington consensus" -- sneering shorthand for policies imposed on developing nations that centered on privatization and steep cuts in government spending and employment.

The consensus was this policy menu would work for every country in crisis -- advice that flies in the face of economic theory calling for spending to increase during a downturn.

Instead, Malpass said he wants to focus the World Bank's programs on what is best for each country.

"I want it to be more and more effective at helping countries find a path to growth and to good outcomes for the people of those countries."

Greater representation

Agustin Carstens, former head of the Mexican central bank and once a deputy managing director of the IMF, credits the organizations with providing needed oversight and policy advice that has prevented "many more crises."

The problem is that, when the IMF is called in, "it goes into an economy at the most difficult time," when all other sources of financing have closed and there are no good options.

But he worries the institutions have failed to adapt to the changing global economy, giving only lip service to the far greater weight of countries like China and India.

With IMF managing director Christine Lagarde set to leave her post on September 12 to take over the European Central Bank, the old powers are poised to continue the tradition of naming a European to lead the fund while an American runs the World Bank, despite past pledges to change.

Carstens, who was a finalist to take over the IMF leadership in 2011 when Lagarde was selected, said the reform is urgently needed to "give more legitimacy to the advice that the fund provides."

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IMF's Lagarde 'honored' to be tapped to head European Central Bank

WASHINGTON -- International Monetary Fund chief Christine Lagarde on Tuesday announced she would step down "temporarily" from the global crisis lender after being nominated to lead the European Central Bank.

EU leaders announced a deal to fill the top positions in the political and economic bloc, including picking Lagarde to succeed ECB chief Mario Draghi, whose single, eight-year term ends in November.

"I am honored to have been nominated for the Presidency of the European Central Bank," Lagarde said in a statement, adding that she would "temporarily relinquish my responsibilities as Managing Director of the IMF during the nomination period."

The nomination means Lagarde will step down two years before the end of her second five-year term at the helm of the IMF, which will open a search for her replacement.

The fund's executive board met Tuesday and named American economist David Lipton, Lagarde's chief deputy, as interim leader of the institution.

"We accept Ms Lagarde's decision to relinquish her IMF responsibilities temporarily during the nomination period," the board said in a statement. 

"We have full confidence in First Deputy Managing Director David Lipton as Acting Managing Director of the IMF."

By tradition, since the institutions were created in the wake of World War II, a European has always led the IMF and an American has been at the helm of the World Bank, although emerging market nations in recent years have pressed for more representation.

When Lagarde was selected in 2011, it was the first time the fund had an open leadership search process, in which any board member or country representative could nominate a candidate. Lagarde was selected over Agustin Carstens, then the head of the Mexican central bank.

She has drawn praise for her role leading the IMF in the wake of the global financial crisis.

"She's been a tremendous ambassador for the fund, a great salesperson, a very good communicator," said Mark Sobel, a former US Treasury official and chairman of the Official Monetary and Financial Institutions Forum.

He told AFP that Lagarde has experience in monetary policy even if she has never led a central bank and, like US Federal Reserve Chairman Jerome Powell, is not an economist.

"She's been involved in all the monetary debate and it's not like they don't discuss monetary policy at the fund."

Her second term in office coincided with the rise of US President Donald Trump and a wave of confrontations among major economies over trade, which the former French finance minister described as the major threat to the world economy.

Lagarde has at the same time acknowledged the strains caused by globalization, which has disrupted industries and marginalized some workers.

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Trump trade war worsens slowdown in global economy: analysts

WASHINGTON — President Donald Trump’s trade war is chilling business investment, confidence and trade flows across the world, a development that foreign leaders and business executives say is worsening a global economic slowdown that was already underway.

Recent softening in Europe, Australia and other parts of the world coincides with Trump’s intensified trade fight with China and other partners. Economists warn that further escalation by Trump — like tariffs on more Chinese goods or levies on foreign autos — could slow global growth to a crawl.

“With these trade tensions, the global economy, in a sense, is getting close to a crossroads,” said Ayhan Kose, the director of the World Bank’s Prospects Group.

Weakness in China, driven in part by fallout from the trade war, has spread to Germany, Australia and other nations, raising supply chain costs, chilling exports and worrying political and economic leaders.

On Tuesday, Mario Draghi, the president of the European Central Bank, said the bank was prepared to inject more stimulus into the eurozone economy to combat the economic slowdown.

The effects of Trump’s trade war have been particularly hard on Germany, Europe’s largest economy, which has been bracing for a decision about whether the United States will impose tariffs on auto imports. Trade anxiety has led to a decline in business sentiment and spending: Overall German industrial production contracted sharply in April, falling 1.9 percent on the month versus the 0.5 percent analysts expected.

“The risks that have been prominent throughout the past year, in particular geopolitical factors, the rising threat of protectionism and vulnerabilities in emerging markets, have not dissipated,” Draghi said in a speech Tuesday. “The prolongation of risks has weighed on exports and in particular on manufacturing.”

Trump lashed out at Draghi by name on Twitter, accusing him of trying to weaken Europe’s currency to get a leg up in global trade by making its goods cheaper to buy overseas.

“Mario Draghi just announced more stimulus could come, which immediately dropped the Euro against the Dollar, making it unfairly easier for them to compete against the USA,” Trump wrote on Twitter. “They have been getting away with this for years, along with China and others.”

The president’s aggressive approach to trading partners comes as developed and developing nations are already pulling back on the rapid globalization that dominated two decades of economic policymaking. Global flows of foreign direct investment fell by 13 percent last year, to their lowest level since the financial crisis, the United Nations Conference on Trade and Development reported last week.

It was the third consecutive annual decline, which officials blamed on multinational corporations bringing cash back to the United States after Trump’s 2017 tax overhaul. Officials warned that trade tensions posed a “downward risk” for a rebound in investment growth this year.

Trump has made steady use of tariffs to punish trading partners like China, Europe, Canada and Mexico that he says have destroyed American jobs by flooding the United States with cheap products and erecting unfair economic barriers at home. The president and his top officials insist that the trade war is lifting the US economy and that any slowdown in global growth is not related to the administration’s trade policies.

Treasury Secretary Steven Mnuchin said in an interview this month that he did not “think in any way that the slowdowns you’re seeing in parts of the world are a result of trade tensions at the moment.” He noted that growth in Asia and Europe had been tapering off before trade talks between the United States and China broke down in early May.

Trump has repeatedly cited China’s slowdown as proof that his trade war is working, telling reporters last week that the United States has “picked up $14 trillion in net worth of the United States.”

“And China has gone down probably by $20 trillion,” he continued. “There’s a tremendous gap.”

But a slowdown in the world’s second-largest economy — one that’s deeply enmeshed in global trade networks — affects other economies.

“China is the biggest trading nation in the world,” said Jacob Funk Kirkegaard, a senior fellow at the Peterson Institute for International Economics in Washington. “The idea that you could slow down the global growth engine and not affect other countries is just not credible.”

Multinational companies are already shifting supply chains and delaying capital spending in response to Trump’s tariffs on Chinese goods and foreign metals.

Tom Linebarger, chairman and chief executive of diesel engine manufacturer Cummins, said last week that his company had lost business for part of its operation in China as a result of the trade war. The Indiana company is changing its sourcing practices to minimize exposure to China, and Linebarger said its costs from tariffs now exceeded the benefits from the corporate tax cuts Trump signed in 2017.

“The tariffs that are in place now, and which may be in place for some time, are a significant burden on US businesses and farms,” Linebarger said.

Data increasingly suggest trade tensions are weighing on economic confidence, globally and in the United States.

A Federal Reserve Bank of New York manufacturing survey registered its worst drop ever on Monday, which many economists blamed on Trump’s threats this month to impose tariffs on Mexican imports as punishment for failing to curb unauthorized immigration. While those tariffs were averted, the chance that Trump could make a similar move against another trading partner has caught the attention of global companies and foreign leaders.

The trade war is having “a much bigger impact” on business hiring and investment in the United States than most analysts think, Deutsche Bank wrote in a research note on Monday. Several measures of policy uncertainty, compiled by economists Scott R. Baker of Northwestern University, Nicholas Bloom of Stanford University and Steven J. Davis of the University of Chicago, have spiked with the increased tensions.

On Tuesday, Trump said on Twitter that he had spoken by phone to President Xi Jinping of China and that the two leaders would have an “extended” meeting next week at the Group of 20 summit in Japan. Those comments could help calm global trade fears, which had risen after the United States accused China of breaking a trade deal last month and Trump raised tariffs on $200 billion worth of Chinese goods as punishment.

But no agreement is guaranteed, and Trump has threatened to impose tariffs on an additional $300 billion of Chinese goods if Xi does not agree to the original deal. The president has already placed import taxes on $250 billion worth of products from China and has hit trading partners with steel and aluminum tariffs and threatened tariffs on foreign autos from Europe and Japan.

The World Bank cut its forecast for global growth by 0.3 percentage points for this year in response to unexpected weakness in trade and manufacturing across advanced and developing economies. Global trade growth has slowed to its lowest rate since the 2008 financial crisis as exports from Europe and Japan have plummeted, particularly to China.

The bank noted that heightened policy uncertainty, including trade tensions, had been accompanied by slowing global investment and weakening confidence. It warned in a report this month that risks to its outlook were “firmly on the downside, in part reflecting the possibility of destabilizing policy developments, including a further escalation of trade tensions between major economies.”

International Monetary Fund economists estimate that if Trump follows through on his threat to broaden the Chinese trade spat, tariffs added this year alone will subtract 0.3 percent off global gross domestic product in 2020, with an additional 0.2 percent drag coming from tariffs the administration put in place last year.

Manufacturing, which is especially vulnerable to trade, is slowing across advanced economies even as service industries hold up. Factory gauges have dipped lower across Europe and are wavering in Japan. In the United States, the Institute for Supply Management’s factory index dropped to its lowest reading of Trump’s presidency in May.

Trade policies aren’t the only culprit behind slowing production. A continuing, structural slowdown in Chinese growth and tensions from Britain’s attempted exit from the European Union are among other factors.

China posted its weakest economic growth in 28 years in 2018, a pullback analysts blame partly on structural reforms and long-running trends and partly on the trade spat. Analysts at Moody’s Investors Service expect a further slowdown in 2019, to 6.2 percent from 6.6 percent, amid continued trade uncertainty.

Europe, where the IMF estimates 70 percent of exports are links in global supply chains, is particularly sensitive to trade disputes. And Germany highlights how the trade war between the United States and China can spill over.

The nation’s car industry is the backbone of its economy and is dependent on China for growth. As trade tensions exacerbate China’s economic weakening, manufacturers in Germany pay the price.

Volkswagen, the world’s largest carmaker, said last week that sales in China fell 7 percent from January through May, to about 1.2 million vehicles. Largely because of China, Volkswagen’s global sales fell 5 percent during the same period.

“We are experiencing the biggest decline in the world auto market in 20 years,” Ferdinand Dudenhöffer, a professor at the University of Duisburg-Essen, said in a report. If Trump follows through on threats to impose further tariffs on China, Dudenhöffer said, “there is danger of a global auto crisis.”

Germany’s central bank has slashed its forecast for growth this year to 0.6 percent from 1.6 percent. That bleak change was “mainly due to the downturn in industry, where lackluster export growth is taking a toll.”

“The fear factor, the uncertainty, is denting willingness to spend, willingness to invest,’’ said Carsten Brzeski, chief economist for Germany and Austria at ING in Frankfurt. “It’s therefore undermining growth in the eurozone.”

And in Australia, where an almost 28-year-old expansion is looking less secure and the central bank recently cut rates for the first time since 2016, economic officials are watching trade wars warily. The governor of the Reserve Bank of Australia, Philip Lowe, called international trade disputes “the main downside risk” in a recent news conference.

If coming trade negotiations don’t end in a resolution, the United States and its companies could also pay a price, leaders of the Business Roundtable, a corporate lobbying group in Washington, warned last week.

“The biggest self-inflicted risk to growth today would be trade going south,” said Jamie Dimon, chief executive at JPMorgan Chase.


2019 New York Times News Service

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