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Cape Town - The global growth outlook faces rising threats from trade tensions and mounting debt despite a strengthening and "increasingly broad-based" expansion currently, according to a statement from world finance ministers and central bankers.
"Risks are broadly balanced in the near term but remain skewed to the downside beyond the next several quarters," according to a communique by the main advisory committee of the International Monetary Fund (IMF), released Saturday in Washington.
"Rising financial vulnerabilities, increasing trade and geopolitical tensions and historically high global debt threaten global growth prospects."
The concerns reflect what the IMF flagged this week in its updated World Economic Outlook. The fund left its forecasts for global growth at 3.9% for this year and next, while warning that threats over trade could derail the strongest upswing since 2011. It also cautioned about the record-high $164trn in world debt.
Demographic headwinds
The language in the International Monetary and Financial Committee statement represents a ratcheting-up of pessimism since the group’s last semi-annual meeting in October and goes further in some respects than a Group of 20 statement issued in March, just as President Donald Trump ramped up trade threats against China.
The communique also raises the idea that "demographic headwinds and subdued productivity growth may reduce the potential for higher and more inclusive growth going forward".
In another change, the IMFC implicitly endorsed the Federal Reserve’s interest-rate increases, saying that "monetary accommodation should continue where inflation remains weak and be gradually withdrawn where inflation looks set to return to central bank targets".
The previous IMFC statement in October said: "monetary policy should remain accommodative, where inflation is still below target and output gaps are negative".
The latest statement reiterates previous language that countries "will refrain from competitive devaluations and will not target our exchange rates for competitive purposes".
The IMFC, the main advisory panel for the IMF, is composed of ministers and central bank governors from about two dozen countries, including the US and China. Policy makers are gathered in Washington for spring meetings of the IMF and World Bank.
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