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International Monetary Fund upgrades outlook on Russian Federation as economy recovers

10 October 2018

Pakistan's currency plunged by almost 7 percent after the government said it would seek emergency bailout loans from the International Monetary Fund (IMF). It was the first downgrade since July 2016. "However, it is projected to rise to 5.1 percent in 2019", the report said.

"Russia's inflation, expected to average 2.8 percent in 2018, is below the target of 4 percent, driven by moderately tight monetary policy". "Risks to global growth skew to the downside in a context of elevated policy uncertainty".

It said that a full-blown trade war between the USA and China would put a significant dent in economic recovery.

Infrastructure needs: Pakistan needs more infrastructure development, Obstfeld added, and the country could benefit from China's role in supporting its project financing.

This forecast is a normalization from the current inflation numbers-which the Philippine Statistics Authority (PSA) recently reported was at 6.7 percent in September alone.

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"We have not been formally approached yet", said Maurice Obstfeld, the IMF's top economist, during the fund's annual meeting in Bali.

The Federal Reserve, the US central bank, has raised short-term USA rates three times this year as the American economy gains strength more than nine years after the end of the Great Recession.

The rupee eventually closed the day at 133.6431 against the dollar in the interbank market, declining by Rs 9.371 or 7.542 per cent, according to the State Bank of Pakistan (SBP).

The IMF's cut to its outlook was broad-based.

In the fund's latest Global Economic Outlook, it estimated that the South African economy would grow by 0.8% this year, down from its initial projection of 1.5% in April.

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In May, U.S. President Donald Trump's administration, which considers both Tehran and Moscow threats worthy of American sanctions, pulled out of the controversial Iran nuclear deal approved in July 2015 with Russia's help.

The IMF said, "The growth forecast for 2018 is 0.3 percentage point lower than the April 2018 WEO forecast". Dow futures lost 0.5 per cent and the S&P 500 futures were down 0.6 per cent.

The Fund said that revenue gains from non-financial public corporations and government financial assets alone could be as high as 3 per cent of GDP a year, equivalent to the annual corporate tax collections across advanced economies.

Other threats to trade, such as a disorderly Brexit, could also "adversely affect market sentiment", the International Monetary Fund argued. "In the case of a flexible exchange rate regime and a further utility price hike, the country would have to face massive inflationary pressure that would trigger unemployment and poverty", Wizarat said.

He called on countries to ensure inclusive growth, which he said was "more important than ever". It left 2018 growth forecasts for the two countries unchanged at 2.9 percent for the United States and 6.6 percent for China.

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The IMF as usual urged emerging economies to accelerate structural reform measures to strengthen their economic fundamentals in the long term.

International Monetary Fund upgrades outlook on Russian Federation as economy recovers