The ongoing trade war between the US and China could start having material effects on the economies of both countries within the coming years, according to new projections from the International Monetary Fund (IMF).
The spokesperson's comments came on a day when Pakistan's Finance Minister Asad Umar met with IMF Managing Director Christine Lagarde in Nusa Dua, Indonesia and formally sought a bailout from the global lender. Using a hypothetical "stress test" scenario developed by the US Federal Reserve for banking regulation, the International Monetary Fund found a severe recession would cut the value of America's publicly held assets by an amount equal to 26 per cent of GDP by 2020.
And the International Monetary Fund anxious that market participants "appear complacent" about the potential risks which could be produced by a "sudden, sharp tightening of conditions" - like rising interest rates or declining access to capital.
"An IMF team will visit Islamabad in the coming weeks to initiate discussions for a possible IMF-supported economic program".
"It's this interaction between the buildup of vulnerabilities and the decline in asset prices that can generate adverse implications for macroeconomic activity", Tobias told a news conference.
Tensions have soared in recent months with US President Donald Trump's administration rolling out billions of US dollars in tariffs against China in a bid to tackle its trade deficit and rein in what Washington views as unacceptable trade practices by the Asian giant.
The IMF warned that China's growth even risked declining by a full percentage point by next year in the event of a "worse-case" scenario, involving further tariffs coupled with a collapse in confidence by businesses and markets.
Mr Milesi-Ferretti noted Nigeria's (economic) growth of about 1.9 per cent this year to rise to about 2.3 in 2019, with South African economy, now in technical recession at only 0.8 per cent growth rate this year.
With much of the U.S.
Trump renewed his threat to impose tariffs on $267 billion worth of additional Chinese imports if Beijing retaliates further with its own higher levies on USA products entering China.
Already the Federal Reserve interest rates hikes are increasing pressure on emerging market economies by fueling an outflow of capital as investors seek higher returns, while increasing borrowing costs at the same time. So, what you do see is that emerging market economies, which is where India is, there's a very fast buildup in private debt with a slowdown in the last two years, But India is basically steady.
The Fund cited a number of other near-term risks to financial stability including the possibility of a "no-deal" Brexit or renewed fiscal policy concerns in some highly indebted euro area countries.
The OECD has also revised down its global growth forecasts.
"The financial regulatory reform agenda should be completed, and a rollback of reforms should be avoided", the Fund said.