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Policy issues weigh on IMF growth forecast

Policy uncertainty has played a role in the International Monetary Fund tempering its global economic growth expectations for 2018-19.

In its latest World Economic Outlook, the IMF has tipped growth in 2018-19 will be 3.7 per cent, a 0.2 per cent drop from its last forecast in April.

The news is sunnier for Australia in 2018, with the IMF revising its growth forecast for the nation up by 0.2 per cent, to 3.2 per cent.

But the Washington-based institution's expectation for Australian growth in 2019 now stands at 2.8 per cent, down by 0.3 per cent from its last report.

In part, this reflects the negative impact of new US trade measures, the IMF said.

IMF economic counsellor Maurice Obstfeld says world growth is still solid compared with earlier this decade, but seems to have plateaued.

A "sharp rise" in policy uncertainty in the past year has contributed to the more moderate growth figures and the weaker trade, manufacturing and investment data underpinning them, he said.

"Uncertainty over trade policy is prominent in the wake of US actions (or threatened actions) on several fronts, the responses by its trading partners, and a general weakening of multilateral consultation on trade issues," he said in the report released in Bali on Tuesday.

The potential failure of Brexit negotiations poses another risk, along with geopolitical tensions in several regions, the economist said.

"We judge that, even for the near future, the possibility of unpleasant surprises outweighs the likelihood of unforeseen good news."

Dr Obstfeld said the biggest challenge facing many advanced economies is slow wage growth and a perception of less social mobility.

Addressing this malaise demands a long-term approach that involves inclusive fiscal policies, investing in education and ensuring access to adequate health care, he said.

Austrlaian Associated PressBack to Breaking News

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