BY Richard Summerfield
The pace of growth of the global economy has surpassed earlier estimations with a marked improvement under way across nearly all the world’s major economies, according to the International Monetary Fund’s World Economic Outlook report.
In 2015, the global economy grew a disappointing 3.2 percent, but the world is on track for 3.6 percent growth this year and 3.7 percent next year, according to the IMF. It upgraded its growth forecast by 0.1 percent for this year and next from the last full Economic Outlook in April and the update to its forecasts in July.
However, there are some black clouds on the horizon. The UK’s growth forecast has been cut by 0.3 points to 1.7 percent since April as a result of the consumer-led slowdown in activity in the first half of the year, caused by the pound’s depreciation.
The IMF has also scaled back the expected growth predicted for the US economy due to uncertainty surrounding president Trump’s ability to institute his proposed tax cuts. As a result, though the IMF still expects the US economy to grow this year, the speed of that growth will be reduced. The IMF forecasts that the economy will see 2.2 percent growth in 2017 and 2.3 percent in 2018; in April it projected 2.3 percent growth this year and 2.5 percent in 2018.
“The downward revision relative to April forecasts reflects a major correction in U.S. fiscal policy assumptions,” the IMF wrote in its latest World Economic Outlook report. Because of “significant policy uncertainty,” the IMF felt it could not count on Congress and the president passing lower taxes.
Regardless of uncertainty in the US and other regions, the global economy is still performing above expectations. The pace of its recovery from the global financial crisis of the 2000s is faster than anticipated.
"The picture is very different from early last year, when the world economy faced faltering growth and financial market turbulence. We see an accelerating cyclical upswing boosting Europe, China, Japan, and the United States, as well as emerging Asia," Maurice Obstfeld, an economic counsellor and director of research at the IMF, wrote in a blog post accompanying the report. "The current global acceleration is also notable because it is broad-based – more so than at any time since the start of this decade."
All 15 countries the IMF tracks individually are expected to grow in 2017 and 2018, with China and India set to lead the pack. China is expected to regain the fastest-growing nation crown with 6.8 percent expansion this year, slightly ahead of India's 6.7 percent. However, India is forecast to take the lead in 2018.