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US trade tensions with China are more likely to deteriorate this year and will dampen global growth in 2019, said Moody's.
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Moody's is expecting more restrictions on Chinese acquisitions of firms in the US and Europe, and the US administration will go forward with some of the proposed restrictions on imports from China, according to quarterly global macroeconomic outlook report by Moody's.
There is a chance of implementation of further tariffs on US imports from China, in addition to the initial 25 percent tariffs on $50 billion worth of imports as well as the steel and aluminum tariffs currently in effect, it said.
Retaliatory action by the Chinese government is likely to follow, the report said, adding that these measures are expected to shave up to 0.3-0.5 percentage points from China's real GDP growth in 2019.
Many major emerging market countries have experienced a decline in economic activity owing to elevated oil prices, mounting trade tensions and tightening of financial conditions, while external headwinds additionally
constrain others, according to Moody's.
The steady firming of crude oil prices by around 65%, with brent rising from a low of about $46 per barrel in June 2017 to a peak of $77 in May 2018, has significantly increased the import burden for large oil importers such as Turkey and India, it said.
The rise in oil prices and weakening of domestic currencies vis-à-vis the US dollar together constitute a considerable deterioration in India's terms of trade, Moody's said. However, for India and Indonesia, robust domestic growth drivers and a buildup of financial buffers in recent years have conferred a degree of stability amid external headwinds, added Moody's.
For most G-20 economies, growth prospects remain solid and the near-term global outlook for many advanced economies is broadly resilient, the credit rating agency said.
G-20 countries are expected to grow 3.3 percent in 2018 and 3.1 percent in 2019, Moody's said, adding that the advanced economies will grow by 2.3 percent in 2018 and 2.0 percent in 2019.
The G-20 emerging markets will remain the growth drivers, at 5.1 percent in both 2018 and 2019, it said.