I.M.F. Warns of Anti-Trade Sentiment Amid Weak Global Growth

WASHINGTON — The International Monetary Fund has warned that sluggish economic growth throughout the world could bolster an anti-trade backlash that has become a feature of politics in both the United States and Europe.

As part of the release of its October World Economic Report at the fund’s semiannual meetings here, the fund forecast global growth to be 3.1 percent this year, rising to 3.4 percent in 2017.

“It is vitally important to defend the prospects for increasing trade integration,” said the fund’s chief economist, Maurice Obstfeld. “Turning back the clock on trade can only deepen and prolong the world economy’s current doldrums.”

Twice a year, government officials, central bankers and financiers from around the world come together for a week of official and unofficial meetings in which they ponder the state of the global economy.

The presidential election in the United States will be a talking point, but a weak global economy and the rise of anti-trade and anti-global sentiment are also expected to be popular subjects for discussion.

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The fund’s outlook for growth in developed economies was particularly gloomy, with a 1.6 percent expansion expected for this year, compared with 2.1 percent last year.

Emerging economies, expected to grow at a 4.1 percent clip, were largely driving global growth now, the fund’s economists said.

Highlighting concerns that many have about the United States economy’s ability to attain a robust level of growth, the fund slashed its forecast for economic growth in the United States to 1.6 percent this year, from 2.2 percent in July.

Coming eight years after the financial crisis and after a wave of aggressive policies by central banks around the world, these growth figures were disappointing, said the fund, which highlighted an inability of global policy makers to address fundamental economic weaknesses.

In warning of deteriorating global trade figures, the report echoed sharp comments last week by Christine Lagarde, the fund’s managing director.

Ms. Lagarde gave a speech in Chicago where she took an indirect swipe at the anti-trade language that has become a central part of the presidential campaign, calling policies that discouraged trade liberalization “economic malpractice.”

In its study, the fund took note of how figures for global trade have been on the wane of late.

For example, the volume of world trade has expanded barely 3 percent a year since 2012, half of the growth it has seen over the last 30 years.

A reluctance by companies and countries to invest significant sums in this period is a main culprit, the fund concluded. But economists also pointed to a sharp increase of all types of anti-trade measures in recent years, with last year recording the largest number of restrictions.

As it always does, fund economists pushed for a globally coordinated strategy to increase output, with the focus being on open trade, economic reform and government investments.

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“Growth has been too low for too long,” Mr. Obstfeld said at a news conference on Tuesday. Mr. Obstfeld said that across all regions, economies were underperforming their “long term growth potential” and that as a result, consumers and investors were stuck in a mode of excessive caution.

In his comments, Mr. Obstfeld urged countries with the capacity to invest in large infrastructure projects to do so, a not-so-indirect reference to Germany, which has been frequently criticized by fund leadership for not doing enough to stimulate growth in Europe.

“The policy response has been unbalanced, relying too much on central banks,” he said.

Asked what the impact would be on the global economy if the Republican presidential candidate, Donald J. Trump, won the election, Mr. Obstfeld parsed his words carefully but suggested that some of Mr. Trump’s anti-trade commentary had been cause for concern.

“There has been a lot of discussion about changes to trade policies,” Mr. Obstfeld said. “This introduces an element of uncertainty to the mix, and uncertainty is not great for investors.”

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Article source: http://www.nytimes.com/2016/10/05/business/dealbook/imf-economic-growth-forecast-trade.html?partner=rss&emc=rss