The global upswing in economic activity is strengthening, with global growth projected to rise to 3.6 per cent in 2017 and 3.7 per cent in 2018, the International Monetary Fund (IMF) said in its October 2017 World Economic Outlook.
Broad-based upward revisions in the euro zone, in Japan, emerging Asia, emerging Europe, and Russia more than offset downward revisions for the United States and the United Kingdom, the IMF said.
“But the recovery is not complete: while the baseline outlook is strengthening, growth remains weak in many countries, and inflation is below target in most advanced economies,” the Fund said.
Commodity exporters, especially of fuel, are particularly hard hit as their adjustment to a sharp stepdown in foreign earnings continues. And while short-term risks are broadly balanced, medium-term risks are still tilted to the downside, the IMF report said.
“For policymakers, the welcome cyclical pickup in global activity provides an ideal window of opportunity to tackle key challenges – namely to boost potential output while ensuring its benefits are broadly shared, and to build resilience against downside risks.”
The growth forecasts for both 2017 and 2018 are 0.1 per percentage point stronger compared with the IMF’s April 2017 World Economic Outlook forecast.
Broad-based upward revisions in the euro area, Japan, emerging Asia, emerging Europe, and Russia – where growth outcomes in the first half of 2017 were better than expected – more than offset downward revisions for the US and UK.
The global pickup in activity that started in the second half of 2016 gained further momentum in the first half of 2017, the IMF said.
Growth is projected to rise over this year and next in emerging market and developing economies, supported by improved external factors – a benign global financial environment and a recovery in advanced economies.
Growth in China and other parts of emerging Asia remains strong, and the still-difficult conditions faced by several commodity exporters in Latin America, the Commonwealth of Independent States, and sub-Saharan Africa show some signs of improvement.
In advanced economies, the notable 2017 growth pickup is broad based, with stronger activity in the US and Canada, the euro zone, and Japan, the IMF said.
“Prospects for medium-term growth are more subdued, however, as negative output gaps shrink (leaving less scope for cyclical improvement) and demographic factors and weak productivity weigh on potential growth.”
Changes to aggregate growth forecasts relative to the April 2017 World Economic Outlook are generally positive but modest, with some meaningful changes for specific country groups and individual countries.
In line with stronger-than-expected momentum in the first half of 2017, the forecast sees a stronger rebound in advanced economies in 2017 (to 2.2 per cent versus two per cent foreseen in April), driven by stronger growth in the euro zone, Japan, and Canada.
In contrast, compared with the April 2017 World Economic Outlook forecast by the IMF, growth has been marked down for 2017 in the UK and for both 2017 and 2018 in the US, implying a 0.1 percentage-point aggregate growth downgrade for advanced economies in 2018.
Activity in the UK slowed more than anticipated in the first half of 2017. As for the US, given the “significant policy uncertainty” (as the report put it, presumably, IMF code-speak for the incoherence of the consistently failing Trump administration), the forecast now uses a baseline assumption of unchanged policies, whereas in April it assumed a fiscal stimulus driven by then-anticipated tax cuts.
Growth forecasts have also been marked up for emerging Europe for 2017, reflecting stronger growth in Turkey and other countries in the region, for Russia for 2017 and 2018, and Brazil in 2017, the IMF said.
(Photo: Piotr Lewandowski)