A positive shift in the world economy in the second half of last year prompted the International Monetary Fund (IMF) to leave unchanged its projections for higher global growth in 2017 and 2018, it announced Monday.
Global growth is projected to be 3.4 per cent this year and 3.6 per cent in 2018, the IMF said in its quarterly report. Both projections are faster that the estimated 3.1-per-cent global growth rate last year, the weakest since 2008-09.
The IMF said the outlook for advanced economies has improved, reflecting somewhat stronger activity in the second half of 2016 in the United States, as well as a projected fiscal stimulus there.
The Washington-based crisis lender said the primary factor underlying the strengthening global outlook for 2017-18 is a projected pickup in growth in emerging markets and developing economies.
“Much of the better growth performance we expect this year and next stems from improvements in some large emerging market and low-income economies that in 2016 were exceptionally stressed,” said Maurice Obstfeld, chief economist of the IMF.
“That being said, compared to our view in October, we now think that more of the lift will come from better prospects in the United States, China, Europe and Japan.”
The report notes that activity rebounded strongly after a weak first half in the US, which the IMF said is now approaching full employment. It cites the US and Germany as among the advanced economies that are now operating close to full capacity.
The report warns of a “wide dispersion of possible outcomes” given uncertainty surrounding the policies of US president-elect Donald Trump, who takes office Friday.
The IMF raised its projections for the US in light of the economy’s momentum coming into 2017 and the expected stimulative fiscal policy under Trump. But it notes that, at this early stage, economists are still short on specifics, making it hard to project impacts.
It mentions “higher popular antipathy toward trade, immigration and multilateral engagement in the United States and Europe” as factors that created vulnerabilities to growth along with widespread high levels of public and private debt and advancing climate change.
The IMF revised upwards near-term growth prospects for China due to expected policy stimulus. China’s growth rate this year is now projected to be 6.5 per cent, a difference of 0.3 per cent. It left unchanged its projection of 6 per cent growth in China next year.
The fund at the same time revised near-term growth prospects downwards for some other large economies, including India, Brazil and Mexico.
The assumptions underpinning the forecast should be more specific by the time of the World Economic Outlook in April, and as more clarity emerges on US policies – and their implications for the global economy – the report stated.