Brexit uncertainty weighing on Europe's economy, International Monetary Fund says, while global growth downgraded

Punjab CM Usman Buzdar welcoming PM Imran Khan. — PTI

It is the first time the fund has cut its forecast in more than two years.

However, in a newspaper article, the country's former ambassador to the World Trade Organisation Manzoor Ahmad said China only accounted for 10 per cent or so of Pakistan's loan repayments.

But the already tricky transition has been complicated by US President Donald Trump's use of import tariffs to punish China for what he considers predatory trade practices. China's economy grew 6.9 per cent in 2017.

Addressing a news conference at the International Monetary Fund and World Bank annual meetings in Bali, the IMF's Maurice Obstfeld cautioned that increased Chinese involvement in Pakistan's economy could bring both benefits and risks.

The IMF warned the uncertainty caused by the trade disputes "could lead firms to postpone or forgo capital spending and hence slow down growth in investment and demand".

On Monday, it downgraded world growth forecasts for next year, blaming new trade barriers.

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The fund urged governments to focus on policies that can share the benefits of growth more widely, helping counter the growing mistrust of institutions, and to avoid "protectionist reactions to structural change". The fund downgraded its forecast for USA growth next year to 2.5 per cent, down 0.2 percentage point from July, after factoring in the impact of tariffs imposed by the Trump administration and retaliatory duties by other nations. The Trump administration's trade dispute with China is expected to be front and center, as are the consequences of the Federal Reserve and other major central banks tightening monetary conditions after a decade of easy money. It said core inflation (excluding all food and energy items) in India had risen to about 6 per cent as a result of a narrowing output gap and pass-through effects from higher energy prices and exchange rate depreciation.

The euro zone's 2018 growth forecast was cut to 2% from 2.2% previously, with Germany particularly hard hit by a drop in manufacturing orders and trade volumes.

Pakistan has been warned not to underestimate the economic risks from its China-funded building projects as the International Monetary Fund's chief economist urged it to carefully examine its relationship with Beijing.

"In the United States, momentum is still strong as fiscal stimulus continues to increase, but the forecast for 2019 has been revised down due to recently announced trade measures, including the tariffs imposed on $200 billion of US imports from China", IMF report said.

The fund cut its 2019 USA growth forecast from 2.7 per cent to 2.5 per cent, and the China growth forecast from 6.4 per cent to 6.2 per cent.

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