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Low wages are causing public to lose faith in governments, International Monetary Fund warns

17 April 2018

'The world economy continues to show broad-based momentum, ' International Monetary Fund chief economist Maurice Obstfeld said. Last year, the expansion covered two-thirds of countries, accounting for three-quarters of global output, making it the broadest upswing since 2010 when the world was coming out of the financial crisis.

Southeast Asia's booming economies of Indonesia, Malaysia, the Philippines, Thailand and Vietnam will collectively maintain growth above five percent this year and next, the fund said.

The IMF today projected a global growth of 3.9 per cent in the next two years due to strong momentum, favourable market sentiment among other factors but warned that any trade disputes threaten to undermine confidence and derail global growth prematurely.

The IMF issued the update to its World Economic Outlook on the eve of spring meetings in Washington this week of the 189-nation IMF, the World Bank and the Group of 20 major economies.

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The World Bank's economic report for Ukraine, the growth outlook has become less certain.

"The first shots in a potential trade war have now been fired", IMF Chief Economist Maurice Obstfeld said in a foreword to the fund's outlook, reiterating IMF's warning earlier this month that the global trading order is in danger of being "torn apart".

The unemployment rate was 5.6 per cent in February. President Donald Trump's war of words with China over trade will be front and center.

Globally, growth is being driven by a surge in business spending and a recovery in trade volumes, according to International Monetary Fund. He has also proposed imposing tariffs on $50 billion in Chinese imports to punish Beijing for its aggressive attempts to obtain foreign technology. Trump has, in turn, ordered the United States trade representative to consider targeting up to an additional $100 billion in Chinese imports.

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The report also says that the forecast of the average annual inflation in 2018 decreased by four percent - down to 11 percent. That could lead to debtors getting into difficulty with repayments as interest rates rise from the post-financial crisis lows.

China with 6.9 per cent growth jumped marginally ahead of India in 2017. The world's second-biggest economy is attempting a transition from super-fast growth based on often-wasteful investment to slower but steadier growth built increasingly on consumer spending.

South Korea's economy grew 3.1 percent last year, accelerating from the previous year's 2.8 percent growth, on the back of robust exports and private spending recovery. Financial markets have been choppy this year, with USA stocks down slightly after a strong performance in 2017.

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Low wages are causing public to lose faith in governments, International Monetary Fund warns