Asian markets close lower amid IMF’s global growth forecast downgrade

President Trump addresses the International Association of Chiefs of Police at its annual convention Monday in Orlando

The International Monetary Fund (IMF) on Tuesday downgraded its outlook for the world economy, warning that the imposition of import tariffs between the U.S. and China were taking its toll on global trade.

"We are seeing more and more - China included - countries that actually let their currency fluctuate, and that certainly has been the case over the last three years as far as China is concerned", she said. The FTSE 100, which closed at 7,233.33, is forecast to open 10 points higher when trading begins shortly.

Global growth is expected to remain steady at 3.7 per cent in 2020, as the decline in advanced economy growth with the unwinding of the U.S. fiscal stimulus and the fading of the favorable spillovers from USA demand to trading partners is offset by a pickup in emerging market and developing economy growth. The IMF has, therefore, not changed its estimate for the US' growth in 2018 keeping it as is at 2.9%.

Regionally the growth forecast for the Middle East and North Africa was lowered by 1.2 and 1.3 percentage points to 2 and 2.5 per cent for this year and 2019. The IMF downgraded its forecast for global growth this year and next to 3.7 percent (down from 3.9 percent in April).

"An intensification of trade tensions and the associated further rise in policy uncertainty could dent business and financial market sentiment, trigger financial market volatility, and slow investment and trade", the report said.

The US growth forecast for 2019 is down from 2.7% to 2.5%. "Any sharp reversal for emerging markets would pose a significant threat to advanced economies".

World Bank President Jim Yong Kim said he's concerned about developing economies losing out from deepening trade tensions, which are being escalated by the U.S.

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It also said Ghana's current account position will however remain negative though lower than before.

Responding to whether the global economy is "safe enough", Lagarde pointed out that "the bottom line is this: ten years after the global financial crisis, we are safer, and measures have been taken, but we are not safe enough".

The outlook for world trade overall also darkened: The fund expects global trade to grow 4.2 percent this year, down from 5.2 percent in 2017 and from the 4.8 percent it expected in July.

Over the longer term, the International Monetary Fund sees ageing populations and sluggish productivity growth as a major challenge to advanced economies.

Thus the expansion of the global economy would be reduced to around 2.9% both next year and in 2020.

United Kingdom growth has been drastically cut in the aftermath of the Brexit vote; uncertainties surrounding the country's divorce from the European Union have stymied investment and seen part of its key financial sector relocate to the continent.

Elsewhere, the IMF said a key risk to financial conditions was if the Federal Reserve tightened monetary policy faster than market expectations.

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