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maltatoday, WEDNESDAY, 19 APRIL 2017 11 Business Today www.creditinfo.com.mt info@creditinfo.com.mt Tel: 2131 2344 Your Local Partner for Credit Risk Management Solutions Supporting you all the way IMF warns trade war could derail improving global economy Global economic growth is gradu- ally picking up, but it remains under threat from rising protectionism and the risk of trade wars, the Interna- tional Monetary Fund warned yes- terday. This comes as the IMF's chief economist said the world economy seems to be gaining momentum. Writing in the IMF's new World Economic Outlook, Maurice Obstfeldt said "we could be at a turning point." The report forecasts global growth this year of 3.5%, up from 3.1% predicted in 2016. "Momentum in the global economy has been building since the middle of last year, allowing us to reaffirm our earlier forecasts of higher global growth this year and next," Obstfeld - conomic counsellor and director of the International Monetary Fund (IMF) Research Department - told reporters. "We project the world economy to grow at a pace of 3.5% in 2017, up from 3.1% last year, and 3.6% in 2018," Obstfeld said. "Acceleration will be broad-based across advanced, emerging, and low income economies, building on gains we have seen in both manufacturing and trade," he said. Commodity prices are also rebounding as global demand rises and oil prices recover from ultra-low levels, reducing the risk of deflation. The United States is leading advanced countries in its growth momentum, due to stronger business and consumer confidence and expectations of tax cuts after the November election. If measures like tax cuts fail to materialize in the US, however, the IMF may have to reassess its outlook, Obstfeldt added. But while growth is picking up, the global economy still looks vulnerable, the IMF said, especially amid the growing threat of protectionist measures that could cut economies off from global trading partners and risk triggering a trade war. While the report didn't mention politicians by name, it cited growing political support in advanced economies "for zero-sum policy approaches that could undermine international trading relationships, along with multilateral cooperation more generally." In particular, the report refers to increasing "pressures for inward looking policies in the advanced economies". The report notes the loss of what it calls middle-skilled jobs in advanced economies as a result of technological change since the early 1990s. There is controversy about to what extent increased global trade might have contributed to those losses. Combined with the slow recovery from recent economic crises, this has affected people on lower incomes and led to growing disillusionment with globalisation the, IMF says. The report warns that this could trigger more protectionist policy actions on trade and immigration. President Trump landed in America's highest office in part due to his protectionist trade views. Recent years have also seen a series of far- right politicians vie for office in the European Union while espousing more isolationist and protectionist sentiments. Those politicians include Marine Le Pen, a candidate in the French presidential election that begins this weekend, as well as Geert Wilders, a recently defeated candidate for prime minister in Holland. The IMF said that "capitulating to those pressures would result in a self-inflicted wound, leading to higher prices for consumers and businesses, lower productivity, and therefore, lower overall real income for households." Instead, countries should work to stop protectionist measures and ensure that gains from growth are shared widely, the IMF said. Other risks to the global economy include faster-than-expected interest rate hikes from the U.S. central bank, which could destabilize vulnerable economies by triggering an outflow of investment, as well as unsustainably fast credit growth in the Chinese financial system. Pound jumps and shares fall after election announcement The British pound soared on Tuesday, climbing more than 1% after UK Prime Minister Theresa May yesterday called a surprise general election. Earlier in the morning, sterling had fallen after it was announced that Downing Street would make a statement. But upon May's announcement, the pound recovered and the spike took the currency to its highest level since December. By yesterday afternoon, the sterling was up 1.4% at $1.274, while against the euro it was up 1% at 1.192 euros. On the stock market, the benchmark FTSE 100 share index was down 151 points, or 2% lower, at 7,178. The rally led the pound to break through the closely watched 200-day moving average, which points investors towards a potential upwards shift in the currency. Moving averages are widely followed measures of momentum that investors use to track price trends over various durations. When market prices either rise or fall through such technical levels, it can be taken as an important signal that accelerates asset movement. Against the euro, the pound strengthened 0.5 per cent, with £0.8421 needed to buy a unit of Europe's shared currency. It is the pound's highest level since lat February. "Not only does this neutralise Labour and the SNP, but it means she can negotiate a Brexit deal along the lines of what she wishes for, rather than having to appease the hardliners in her own party," chief European financial economist at Jefferies David Owen said. "She is now in a position to neutralise them as a threat." International Monetary Fund projects a marginally higher than expected growth for the world economy at 3.5% in 2017 The IMF warned that protectionist measures could cut economies off from global trading partners and risk triggering a trade war