Emerging Economies Facing Headwinds from Weaker Capital Flows, Currency Dips, Says IMF’s Gita Gopinath


Team Udayavani, Jan 22, 2019, 3:16 AM IST

Davos: IMF Chief Economist Gita Gopinath on Monday flagged weakening global growth at a rate higher than expected and said emerging economies are also facing risks triggered by capital flows due to US actions and currency depreciations.

While global growth in 2018 remained close to post-crisis highs, the global expansion is weakening and at a rate that is somewhat faster than expected, Gopinath said here while announcing the latest update to the IMF’s World Economic Outlook.

IMF has projected global growth at 3.5 per cent in 2019 and 3.6 per cent in 2020, 0.2 and 0.1 percentage point below its October projections. Notwithstanding the modest downward revisions, Gopinath said risks to more significant downward corrections are rising.

While financial markets in advanced economies appeared to be decoupled from trade tensions for much of 2018, the two have become intertwined more recently, tightening financial conditions and escalating the risks to global growth, she added.

The US expansion continues, but the forecast remains for a deceleration with the unwinding of fiscal stimulus. Economic activity in emerging and developing economies is also projected to tick down to 4.5 per cent in 2019, with a rebound to 4.9 per cent in 2020.

The outlook for emerging markets and developing economies reflects the continued headwinds from weaker capital flows following higher US policy rates and exchange rate depreciations, even though they have become less extreme, she said.

Across emerging economies, some of the pickup in inflation reversed towards the end of 2018, she added. An escalation of trade tensions and a worsening of financial conditions are key sources of risk to the outlook. Higher trade uncertainty will further dampen investment and disrupt global supply chains, Gopinath added.

A more serious tightening of financial conditions is particularly costly given the high levels of private and public sector debt in countries, IMF’s first woman chief economist said with Managing Director Christine Lagarde sitting by her side.

China’s growth slowdown could be faster than expected, especially if trade tensions continue, and this can trigger abrupt sell-offs in financial and commodity markets as was the case in 201516, Gopinath said.

In Europe, the Brexit cliffhanger continues, and the costly spillovers between sovereign and financial risk in Italy remain a threat. In the US, a protracted US federal government shutdown poses downside risks. 

Udayavani is now on Telegram. Click here to join our channel and stay updated with the latest news.

Top News

Udaipur killing: Cong alleges one of main accused ‘BJP member’

Retired Karnataka SP gets 4 years in jail in disproportionate assets case

Bantwal: Several injured in head-on collision between cars

Udupi: Family carries dead body on shoulders through knee-deep water

SpiceJet’s Delhi-Jabalpur flight returns after crew notices smoke in cabin mid-air

MS Dhoni gets treatment for knee pain in Ranchi village, doctor sits under a tree

Bengaluru: Woman from Brahmavar ends life after killing her daughter


Related Articles More

Reliance Industries stock tumbles over 7 pc; ONGC tanks more than 13 pc

RBI ask banks to test note sorting machines on quarterly basis

India’s manufacturing sector activity eases to 9-month low in Jun amid price pressure

Bajaj Auto sales at 3,47,004 units in June

Govt hikes gold import duty to 15 pc

MUST WATCH

India’s first unmanned combat aircraft flight successful

How to earn God’s grace?

NEW BULLETIN 01-07-2022

Heavy Rain Mallar Urdu school Damage

Heavy rain at kaup area


Latest Additions

Udaipur killing: Cong alleges one of main accused ‘BJP member’

Retired Karnataka SP gets 4 years in jail in disproportionate assets case

Capt Amarinder Singh to merge party with BJP, claims saffron party leader

Maha: Amravati chemist stabbed to death for alleged social media post supporting Nupur Sharma; five held

Five of a family found dead in Kerala

Thanks for visiting Udayavani

You seem to have an Ad Blocker on.
To continue reading, please turn it off or whitelist Udayavani.