In its latest forecast, the International Monetary Fund (IMF) has cut the growth forecast for the world economy – but increased its forecast for the growth of Israel’s economy. The report slashes world economic growth by 0.2 percent, with the global economy set to grow 3.7 percent in 2018 and 2019. Israel’s economy, the IMF said, will grow 3.6 percent in 2018 and 3.5 percent in 2019.
With that, the IMF said, Israel’s economic growth will gradually slow over the next five years, with growth falling to 3 percent by that point. Inflation is also expected to be higher than expected; in 2018 inflation will hit 1 percent, instead of the 0.7 percent previously predicted.
The American economy will not fare as well as Israel’s, the IMF said, with U.S. growth expected to be 2.9 percent in 2018, and 2.5 percent in 2019. China’s economy will also slow, with growth this year expected to be 6.6 percent, slowing to 6.2 percent in 2019. The slowing of both economies is due to the growing trade war between the U.S. and China, which is dragging on the world economy, the IMF said. Brexit, and the renegotiation of NAFTA, are also factors that are shaking the foundations of international growth, the organization said.
“Two major regional trade arrangements are in flux — NAFTA (where a new trilateral agreement awaits legislative approval) and the European Union (with the latter negotiating the terms of Brexit). U.S. tariffs on China, and more broadly on auto and auto-part imports, may disrupt established supply chains, especially if met by retaliation, ” CNBC quoted Maurice Obstfeld, IMF chief economist, as saying.
“The impacts of trade policy and uncertainty are becoming evident at the macroeconomic level, while anecdotal evidence accumulates on the resulting harm to companies. Trade policy reflects politics, and politics remain unsettled in several countries, posing further risks,” Obstfeld added.