IMF says constructive US-China dialogue, reduced tensions good for world economy
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US President Donald Trump (left) and Chinese President Xi Jinping arriving for a state banquet at the Great Hall of the People in Beijing on May 14.
PHOTO: KENNY HOLSTON/NYTIMES
- IMF welcomed constructive US-China dialogue, stating reduced trade tensions benefit both major economies and the global economy.
- IMF stated global economy is entering an "adverse scenario," with GDP growth falling to 2.5% due to Middle East conflict and US$100 oil prices.
- IMF is discussing financial assistance for countries struggling with energy costs, advising against broad fuel subsidies and offering policy advice.
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WASHINGTON - The International Monetary Fund said on May 14 that it welcomes the initial positive dialogue between US President Donald Trump and Chinese President Xi Jinping, adding that reducing tension and uncertainty between the world’s two largest economies was good for the world.
“It’s very important, of course, that the world’s two largest economies are engaging at the highest level,” IMF spokesperson Julie Kozack told a news briefing when asked about the Trump-Xi summit’s initial outcomes in Beijing.
“We certainly welcome the fact that there’s a constructive dialogue between the two countries. Anything that is going to help reduce trade tensions and reduce uncertainty is good for both of those large economies, and, of course, good for the global economy as well,” Ms Kozack added.
She said that because of pressures from the Middle East war and Iran’s closure of the Strait of Hormuz, which has kept crude oil prices above US$100 (S$128) per barrel, the global economy is clearly moving into the middle of the three economic scenarios that the IMF outlined in its April World Economic Outlook.
The IMF’s middle “adverse scenario” would see global real GDP growth falling to 2.5 per cent this year, compared with 3.1 per cent in the more benign “reference forecast” that assumes a quick end to the conflict, from 3.4 per cent growth in 2025.
The adverse scenario assumes US$100-per-barrel oil for the full year but also a tightening of financial conditions and rising inflation expectations.
Ms Kozack said that although higher energy prices have pushed up expectations of short-term price increases, the IMF views medium-term inflationary expectations as remaining well-anchored. And financial conditions in the global economy remain accommodative, she said.
The IMF continues to discuss possible financial assistance for member countries that are struggling with higher energy and commodity costs due to the Middle East conflict. But she did not provide any details on specific countries, nor comment on a Reuters report that Iraq has sought financial assistance.
IMF managing director Kristalina Georgieva said during the Fund and World Bank’s spring meetings in April that at least 12 countries were expected to need assistance totalling US$20 billion to US$50 billion (S$25 billion to S$50 billion) from the two institutions, which are consulting on how best to aid member countries.
Ms Kozack declined to provide any updates to those figures.
“Right now, what we are seeing is that many countries are actually asking us for support in the policy area,” she added. “They are asking us for policy advice. How can they best respond to the shock given the individual country circumstances?”
The Fund in April said member countries should avoid broad fuel assistance subsidies that would drain scarce fiscal resources and stoke oil demand at a time of constrained supplies, pushing up prices further. REUTERS
