It is very common in academic, political and international organizations to make economic growth projections for each year, these projections being debated in the first months of each year and adjusted according to economic and geopolitical events. The International Monetary Fund (IMF) is no exception, and recently maintained its forecast for the growth of the world economy for this year, at 3.9%, but warned about the effects of a trade war between the United States and China.
In its update of the economic forecasts for April, the IMF also kept the expectation for 2019 unchanged, when world GDP should also increase by 3.9%.
"The risk that current trade tensions will intensify and negatively impact confidence and investment represents the greatest threat to global growth in the short term," said Maurice Obstfeld, IMF chief economist.
The entity revised downward from 0.4 percentage point, from 2.0% to 1.6%, its growth forecast for the economy of Latin America and the Caribbean for this year.
The Fund pointed out that this reduction is a reflection of the need for adjustments in Argentina, a scenario of political uncertainties in Brazil and the still unresolved trade tensions between Mexico and the United States.
As we know, Argentina was rocked by an acute financial crisis in the first half of this year that led the government to turn to the IMF for a US $ 50 billion loan. However, the country continues with high inflation and a basic interest rate of 40%, one of the highest in the world.
In the case of Brazil, it was noted that "The economy is performing below its potential, public debt is high and growing, and, even more important, the medium-term growth prospects remain uninspiring," said the IMF. For this 2018, the IMF expects a growth of 1.8% in Brazil; a cut of half a percentage point compared to what was estimated in April.
In relation to Mexico, the IMF kept its growth expectation unchanged in relation to April, 2.3%, although it cut the forecast for 2019, from 3% to 2.7%.
The projection for the two main economies of the world - the United States and China - remained unchanged for this year despite the trade war that faces them. China remains strong with a projection of around 6.5%.
For the IMF, the growth of western developed countries will stand at 2.4% (-0.1 percentage point) in 2018, with the United States leading (2.9%), thanks to the impulse of the tax cut implemented at the end of 2017.
The Fund also reduced the expansion forecast for the Eurozone (-0.2 percentage points to 2.2%), due to lower forecasts for Germany (-0.3 percentage points to 2.2%), France (-0.3 percentage points to 1.8%) and Italy (-0.3 pp to 1.2%).
Therefore, I consider that the IMF's world growth projections for this year are reasonable although geopolitical factors could play a more relevant role and influence how 2018 will end. The tensions of the new cold war between the United States and Russia, due to discrepancies in various aspects such as regional conflicts in the Middle East, among others, they remain and also because the recent summit between the presidents of both countries in Helsinki, have not managed to overcome, to this must be added the role increasingly influential of China as a military power that also has serious discrepancies with the United States, apart from the commercial issue.
