In its July 2017 update of its world economic outlook report, the International Monetary Fund (IMF) has revised upwards its growth projections for several euro zone countries, including France, Germany, Italy, and Spain, where growth for the first quarter of 2017 was generally above expectations.
“This, together with positive growth revisions for the last quarter of 2016 and high-frequency indicators for the second quarter of 2017, indicate stronger momentum in domestic demand than previously anticipated,” the IMF said.
The growth forecast has been revised down for the United Kingdom for 2017 on weaker-than-expected activity in the first quarter.
The growth forecast in the United States has been revised down from 2.3 per cent to 2.1 per cent in 2017 and from 2.5 per cent to 2.1 per cent in 2018.
“While the markdown in the 2017 forecast reflects in part the weak growth outturn in the first quarter of the year, the major factor behind the growth revision, especially for 2018, is the assumption that fiscal policy will be less expansionary than previously assumed, given the uncertainty about the timing and nature of US fiscal policy changes. Market expectations of fiscal stimulus have also receded.”
The growth forecast for 2017 was also revised up for Canada, where buoyant domestic demand boosted first-quarter growth to 3.7 per cent and indicators suggest resilient second-quarter activity, and marginally for Japan, where private consumption, investment, and exports supported first-quarter growth.
The pickup in global growth anticipated in the April World Economic Outlook remains on track, with global output projected to grow by 3.5 per cent in 2017 and 3.6 per cent in 2018. The unchanged global growth projections mask somewhat different contributions at the country level.
US growth projections are lower than in April, primarily reflecting the assumption that fiscal policy will be less expansionary going forward than previously anticipated.
Growth has been revised up for Japan and especially the euro area, where positive surprises to activity in late 2016 and early 2017 point to solid momentum.
China’s growth projections have also been revised up, reflecting a strong first quarter of 2017 and expectations of continued fiscal support. Inflation in advanced economies remains subdued and generally below targets; it has also been declining in several emerging economies, such as Brazil, India, and Russia.
In Emerging and Developing Europe, growth is projected to pick up in 2017, primarily driven by a higher growth forecast for Turkey, where exports recovered strongly in the last quarter of 2016 and the first quarter of 2017 following four quarters of moderate contraction, and external demand is projected to be stronger with improved prospects for euro area trading partners.
The Russian economy is projected to recover gradually in 2017 and 2018, in line with the April forecast, the IMF said.
(Photo: Bruno Sanchez-Andrade)