IMF warns of global economic instability in its World Economic Outlook Update: “Amid rising tensions over international trade, the broad global expansion that began roughly two years ago has plateaued and become less balanced,” The IMF said in its July update of the World Economic Outlook. While the IMF continues to maintain that global GDP growth will come in at 3.9% in 2018, and 2019, the global lender sees that the “risk of worse outcomes has increased, even for the near term.” The IMF notes that while growth remains strong in advanced economies, it has slowed in many of them, in the Eurozone, Japan, and the UK. Even US growth is projected to decelerate over the next few years. “The risk that current trade tensions escalate further—with adverse effects on confidence, asset prices, and investment—is the greatest near-term threat to global growth,” according to the report.

Fed policy is also a leading contributors to constrained global growth: The US Federal Reserve looks to be on track to raising over the next two years, given strong US employment and firming inflation figures, the report said. “The USD has already appreciated broadly since April, and financial conditions facing emerging and frontier economies have become somewhat more restrictive.” In other words, emerging markets can look forward to a continued rough time ahead.

For emerging markets, the IMF is still projecting GDP growth rates of 4.9% for 2018 and 5.1% for 2019, despite changing economic headwinds in oil prices, US interest rates and USD appreciation, and a sell-off. The report that its broader assessment of EMs belie specific conditions in a number of individual countries, particularly those EMs that are hardest hit by the EM zombie apocalypse. “Central banks in key emerging market economies —including Argentina, India, Indonesia, Mexico, and Turkey—have raised policy rates, responding to inflation and exchange rate pressures (coupled with capital flow reversals in some cases). Long-term yields have also increased in recent months, and spreads have generally widened. Most emerging market equity indices have declined modestly, reflecting, in some cases, concerns about imbalances (e.g., Argentina and Turkey), and, more generally, rising downside risks to the outlook.”

You can catch the press release for the report, the landing page or the full report (pdf) here.