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Euro Area: Time to Tackle The Tough Challenges

The euro area economy is still in a good place. Growth remains strong, broad-based, and job-friendly, even if there are signs that it has peaked. At the same time, risks are rising, including escalating trade tensions and policy complacency among euro area countries. Rebuilding fiscal buffers and addressing structural issues to improve resilience, and building support for euro area reforms is now even more urgent, says the latest economic IMF health check of the euro area. Euro area growth appears to be leveling off from the very high levels of ...

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Euro zone banks at risk if rates rise sharply – IMF

Euro zone banks would face a “material impact” on their capital and cash positions if interest rates rose abruptly, the International Monetary Fund said, urging local watchdogs to sharpen up their analytical tools. The warning, based on a stress test of the euro area banking sector, came as the European Central Bank began to pave the ground for the first interest rate hike in eight years, which investors now expected in late 2019. The IMF estimated euro area banks would see their core capital fall to 10 percent in 2020 ...

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Trade-War Damage Would Deepen Under Confidence Shock, IMF Says

President Donald Trump’s campaign to slap tariffs on everything from Chinese steel to German cars could set off a shock to business confidence that takes a significant bite out of global output, according to an analysis by the International Monetary Fund. World economic output would be 0.5 percent less in two years if the U.S. follows through on all its tariff threats, other countries retaliate, and tightening financial conditions lower business investment, the IMF predicts in an analysis released Wednesday. The report serves as a warning to Group of 20 ...

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IMF Says Brexit Won’t Hit European Economy Hard

The U.K.’s planned exit from the European Union will have a “small” negative impact on the bloc’s economy, although it will prove more damaging to countries such as Ireland, the Netherlands and Belgium that have closer links with Britain, the International Monetary Fund said Thursday. In its annual review of the eurozone’s economic policies, the Washington, D.C.-based institution also warned that failure to reduce the large trade surpluses recorded by Germany and some other members could provoke a protectionist response from their partners, as evidenced by recent tariffs imposed by ...

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No-deal Brexit would cost European Union 1.5 percent of GDP – IMF

European Union countries will suffer long-term damage equivalent to about 1.5 percent of annual economic output if Britain leaves the bloc without a free trade deal next year, the International Monetary Fund said on Thursday. Britain is due to leave the EU on March 29 next year, and Prime Minister Theresa May has yet to reach a consensus within her own Conservative Party on what future ties with the EU should look like, let alone broker a final deal with the EU. The EU’s lost economic output in the case ...

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IMF forecasts 6.6% growth for China

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 July 16. ‘We continue to project global growth rates of just about 3.9 percent for ...

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Trade War Imperils World Growth as IMF Sees ‘Complacent’ Markets

Escalating trade tensions are threatening to derail a global upswing that’s already losing momentum amid weaker-than-expected growth in Europe and Japan as financial markets seem complacent to the mounting risks, the International Monetary Fund warned. The IMF kept is global forecast unchanged Monday in the latest update to its Global Economic Outlook. The world economy will grow 3.9 percent this year and next, said the Washington-based fund. The pace this year would be the fastest since 2011. But cracks are forming in the growth picture. The global expansion is becoming ...

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IMF warns U.S. vulnerable in escalating trade fight

The International Monetary Fund warned on Monday that escalating and sustained trade conflicts are increasingly likely, threatening to derail economic recovery and depress medium-term growth prospects. The IMF, in an update to its World Economic Outlook growth forecasts, said that the United States, as the focus of retaliatory tariffs from trading partners, was especially vulnerable to a slowdown in its exports. An escalation of tariffs to levels threatened by the United States, China and other countries would not only have a direct effect on demand, but would heighten uncertainty and ...

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IMF Cuts India Growth Forecast A Touch On Higher Oil Prices

The International Monetary Fund has cut India’s growth forecast for fiscal year 2018-19 and 2019-20, citing the drag from higher oil prices and tighter monetary policy. In the July review of its World Economic Outlook, the IMF said that it expects emerging and developing Asia to maintain its robust performance. However, country-specific factors led the multi-lateral agency to peg down growth forecasts for both India and China. In the case of India, growth in 2018-19 is seen at 7.3 percent. This is 0.1 percentage point lower than the IMF’s previous ...

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OECD economic scenarios to 2060 illustrate the long-run benefits of structural reforms

Policy choices made today can have important positive effects on future living standards, according to new long-term economic scenarios released by the OECD. The Long View: Scenarios for the World Economy to 2060 extends the usual short-run horizon of economic forecasters to better illustrate the potential benefits of reforms to education, governance, labour market policies and product market regulations, whose effects play out over decades. In a “business-as-usual” reference scenario without significant reforms, living standards (GDP per capita) in the OECD countries improve by between 1½ and 2% per annum ...

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Euro zone budget could be conditional on discipline – IMF’s Lagarde

IMF Managing Director Christine Lagarde said on Saturday that a proposed joint euro zone budget could be designed with conditions so that it does not become a no-strings-attached transfer of rich countries’ cash to poorer members. The leaders of France and Germany agreed last month on a proposal for such a budget that would be used to smooth out economic difference between euro zone countries and stabilise their economies when facing shocks. The Franco-German idea, at the heart of French President Emmanuel Macron’s plans for deeper euro zone integration, quickly ...

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IMF cuts German 2018 economic growth forecast to 2.2 percent

The International Monetary Fund (IMF) on Thursday cut its 2018 forecast for German GDP growth to 2.2 percent, saying rising protectionism and the threat of a hard Brexit had exposed Europe’s biggest economy to significant short-term risks. The Washington-based lender, whose previous prediction from April was 2.5 percent, edged its 2019 forecast up to 2.1 percent from 2.0 percent. “Short-term risks are substantial, as a significant rise in global protectionism, a hard Brexit, or a reassessment of sovereign risk in the euro area, leading to renewed financial stress, could affect ...

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U.S. Emphasized ‘Strong Commitment’ to WTO, IMF Says

The U.S. remains committed to the World Trade Organization, the International Monetary Fund said a report that cast doubt on speculation the Trump administration plans to withdraw from the Geneva-based organization. “The authorities emphasized their strong commitment to the WTO and listed WTO reform as a key trade priority, welcoming reform proposals from other members,” the fund said in an annual report on the world’s largest economy. Axios reported July 1 that President Donald Trump ordered a draft bill that would declare the U.S. was abandoning WTO’s system of global ...

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U.S. dollar share of global currency reserves fall further – IMF

The U.S. dollar’s share of currency reserves reported to the International Monetary Fund fell in first quarter of 2018 to a fresh four-year low, while euro, yuan and sterling’s shares of reserves increased, according to the latest data from the International Monetary Fund. The share of dollar reserves shrank for five consecutive quarters as the greenback weakened in the first three months of 2018 on expectations faster growth outside the United States and bets that other major central banks would consider reducing stimulus. Still the dollar has remained the biggest ...

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Challenges remain to Greece’s long-term debt sustainability – IMF

Greece exits its third international bailout in August, but without further debt relief it may not be able to sustain market access in the long run, the International Monetary Fund said on Friday. Greece and its European partners agreed last week on a set of debt measures to help the country emerge smoothly from the programme. The deal significantly improved medium-term debt sustainability but “longer prospects remain uncertain,” the IMF said. The Fund said that European assumptions on Greece’s future growth were “very ambitious”, and those targets, along with aim ...

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