IMF forecasts 6.6% growth for China

Growth in China is projected to moderate from 6.9 percent in 2017 to 6.6 percent in 2018 and 6.4 percent in 2019. [Photo/VCG]

The International Monetary Fund has forecast that China's economy will grow 6.6 percent in 2018－unchanged from its April projection－in its latest World Economic Outlook, which stresses that the risk that current trade tensions escalate further is the greatest near-term threat to global growth.

Amid rising tensions over international trade, the broad global expansion that began roughly two years ago has plateaued and become less balanced, Maury Obstfeld, director of the IMF Research Department, said on Monday.

"We continue to project global growth rates of just about 3.9 percent for both this year and next," Obstfeld said. "China continues to grow in line with our earlier projections."

Growth in China is projected to moderate from 6.9 percent in 2017 to 6.6 percent in 2018 and 6.4 percent in 2019, as regulatory tightening of the financial sector takes hold and external demand softens, the IMF said in its July report released on Monday in Washington.

Beijing has targeted a gross domestic product growth of around 6.5 percent for 2018, Premier Li Keqiang said at the annual national legislative meeting in early March.

Obstfeld said growth remains generally strong in advanced economies, but it has slowed in many of them, including countries in the euro area, Japan, and the United Kingdom.

The world economic outlook is clouded by ongoing trade tensions and waning support for global economic integration in some advanced economies, according to the IMF report.

The risk that current trade tensions escalate further－with adverse effects on confidence, asset prices, and investment－is the greatest near-term threat to global growth, Obstfeld said.

The Trump administration has enraged its major trade partners including the European Union, Canada and Mexico by imposing a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum.

It has also ignited what China's Ministry of Commerce called "the largest trade war in economic history" with 25 percent tariffs on more than 800 Chinese products worth $34 billion, followed by a new round of hefty duties on additional Chinese imports worth $200 billion.

In turn, the US faces retaliation or retaliatory vows from China, the European Union, its North American Free Trade Agreement partners, and Japan, among others, the IMF report said.

It said an escalation of trade tensions could undermine business and financial market sentiment, denting investment and trade.

"Our modeling suggests that if current trade policy threats are realized and business confidence falls as a result, global output could be about 0.5 percent below current projections by 2020," Obstfeld said.

In a release earlier this month, the Bank of England, the central bank of the United Kingdom, forecast that further escalation in the trade war, or a 10 percentage-point rise in tariffs between the US and all of its trading partners, could chop 2.5 percent off US output and 1 percent off global economic output.

The IMF July report forecasts the US economy to expand at 2.9 percent in 2018 and 2.7 percent in 2019, also in line with the IMF's April report.

Already, some US companies are pulling back investments in equipment and jobs "as a result of uncertainty over trade policy", according to the minutes of the Federal Reserve Board's June meeting, which were released on July 5.