International Monetary Fund maintains 3-pct growth forecast for S. Korea

South Korean Finance Minister Kim Dong-yeon shakes hands with International Monetary Fund chief Christine Lagarde before a meeting in Washington

"The first shots in a potential trade war have now been fired", IMF Chief Economist Maurice Obstfeld said in a foreword to the fund's outlook, reiterating IMF's warning earlier this month that the global trading order is in danger of being "torn apart".

Its goals are to ensure the stability of the worldwide monetary system (exchange rates and global payments), to secure financial stability, facilitate global trade, promote high employment and sustainable economic growth, and reduce poverty. However, the forecast for the next year worsened - down to 3.3 percent. That's in line with its most recent estimate in January. Its decision-making also reflects members' relative influence.

He said Donald Trump's tax cuts would suck imports into the United States and increase the size of the trade deficit 2019 by $150bn - a trend that could exacerbate trade tensions.

The global economy is still on an upswing, but the good times may not last beyond the next year or two. "Instead, it is in danger of being torn apart".

"Regulators in China have taken important measures to rein in shadow banking and bring financial activity back onto bank balance sheets, where capital and provisioning requirements provide greater loss absorption capacity than in opaque off-balance-sheet channels", the International Monetary Fund said.

It was not "paradoxical" that major economies were "flirting with trade war" while economies were expanding because many households had seen little or no benefit from growth. A year ago the fund said China's credit growth was on a "dangerous trajectory".


"If policymakers are complacent and do not tackle the challenge of strengthening long-term growth, political risks could intensify, possibly reversing some of the progress that economic reforms and integration have achieved to date".

The latest forecast is unchanged, "with the short-term firming of growth driven by a recovery from the transitory effects of the currency exchange initiative and implementation of the national goods and services tax, and supported by strong private consumption growth", the WEO said.

The WEO upgraded the United States, which is expected to expand by 2.9% in 2018 and 2.7% in 2019 - up from the 2.7% and 2.5% predicted in January.

"They're very closely aligned with our forecasts", said Brett House, the deputy chief economist at Scotiabank, where the prediction for Canada is one-tenth of a percentage point higher than what the International Monetary Fund projects.

Forecasts were cut slightly for Canada, the Middle East and North African countries, as well as a number of low-income developing countries.

Such growth should help the Australian jobless rate ease to 5.2 per cent in 2019 and close to what the Reserve Bank believes to be "full employment" at five per cent.

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