The future’s bright – IMF

BY Richard Summerfield

The International Monetary Fund has predicted an upturn in the global economy in its latest World Economic Outlook Update.

The global economy is expected to have grown by 3.7 percent in 2017, 0.1 percent faster than the IMF projected last autumn and half a percent higher than in 2016. The pickup in growth has been broad based, with notable upside surprises in Europe and Asia. The report says 120 economies – both developed and emerging – accounting for three-quarters of global economic activity, saw an improvement in 2017.

Looking ahead, recent reforms to the US tax regime will also have a positive impact on global growth over the next two years, the IMF has suggested.

“The effect on US growth is estimated to be positive through 2020, cumulating to 1.2 percent through that year, with a range of uncertainty around this central scenario,” the report noted. Yet, the IMF argued that the impact of the reforms will not be long lasting “due to the temporary nature of some of its provisions, the tax policy package is projected to lower growth for a few years from 2022 onwards".

Global growth forecasts for 2018 and 2019 have been revised upward by 0.2 percent to 3.9 percent. Advanced economies, where growth is now expected to exceed 2 percent in 2018 and 2019, will be responsible for the majority of the growth.

The eurozone is also expected to see improved growth. The IMF has revised its predicted growth rates for Germany, Italy and the Netherlands, based on improved momentum in domestic demand and higher external demand. However, Spain, which has been performing admirably in recent years, has seen its growth forecast for 2018 revised down, in light of the perceived effect that increased political uncertainty will have on confidence and demand.

UK growth will be 1.5 percent in 2018 and 2019. In October, the IMF reported that the UK’s estimated growth in 2019 would be 1.6 percent, however Brexit and its potential implications for trade barriers and regulatory realignment may dampen UK growth moving forward.  Of the G7 nations, the UK s projected to outgrow Italy and Japan over the next two years, but lag behind the rest of the group.

Emerging and developing Asia will see growth of around 6.5 percent in 2018 and 6.6 in 2019, the IMF estimates. Emerging and developing Europe will see growth of 5.3 percent in 2018 and 2019.

Report: World Economic Outlook Update, January 2018

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