IMF World Economic Outlook Report Raises Concerns for Long-Term Growth

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In its bi-annual World Economic Outlook, IMF kept its growth projections for India unchanged at 7.4% for 2018-19 and 7.8% for 2019-20, holding that economic activity will be lifted by strong private consumption as well as fading transitory effects of demonetisation and implementation of the Goods and Services Tax. But the forecast for 2019 was unchanged at 2 per cent.

Analysts believe that the recently-introduced 5 per cent value-added tax in the UAE and Saudi Arabia could be one of the key reasons for the spike in inflation this year. The world's second-biggest economy is attempting a transition from super-fast growth based on often-wasteful investment to slower but steadier growth built increasingly on consumer spending. However, the fund said growth will be lower than expected after 2022, due to the higher budget deficit and the expiry of fiscal stimulus. Over the medium term, global growth is projected to decline to about 3.7% due to a shift toward inward-looking policies that harm worldwide trade and a potential further buildup of financial vulnerabilities that could give way to rapid tightening of global financial conditions, it warned.

"The UAE is seeing a new period of slow and steady economic growth, supported by twin boosters of oil-producing giant Abu Dhabi partnered with Dubai benefiting from many years of efforts towards diversification".

The Trump administration has maintained that Republican tax cuts passed last year would allow the United States to maintain sustained gross domestic product growth above 3 percent for years and defy forecasts that US budget deficits will balloon over the coming decade.

"Conflict could intensify if fiscal policies in the United States drive its trade deficit higher without action in Europe and Asia to reduce surpluses", he said.

The IMF said prospects for developing economies to grow per-capita incomes face difficulties over the next five years, especially in commodity-exporting countries in the Middle East, sub-Saharan Africa, Latin America and the Caribbean.

Because the USA boost accounts for most of the higher world expansion, beyond 2019 "global growth is projected to gradually decline to 3.7 per cent by the end of the forecast horizon", the report said. The growth is expected to pick up pace next year as the region will 3.6 per cent. Inflation in Mena averaged around 6.6 per cent last year and is expected to reach 8.7 per cent this year but will ease next year to 7.1 per cent, reveals International Monetary Fund data. In some cases, the price increase also reflects production restraints that directly weigh on real GDP.

India is expected to grow at 7.4 per cent in 2018 and 7.8 per cent in 2019, leaving its nearest rival China behind respectively at 6.6 and 6.4 per cent in the two years, the International Monetary Fund (IMF) said on Tuesday. It predicts world growth of 3.9 per cent in 2018 and 2019, despite raising its estimates for United States and European Union growth compared to the January edition.

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