IMF estimates global growth uptick in 2017-2018

IMF

Jan 17, 2017 (LBO) – The International Monetary Fund has estimated global growth of 3.1 percent in 2016, which is projected to increase to 3.4 percent in 2017 and 3.6 percent in 2018, the latest World Economic Outlook report said.

Although the 2017-2018 estimates remain unchanged from their October forecast, the outlook for advanced economies has improved along with possible fiscal stimulus in the United States under a Trump administration.

“After a lackluster outturn in 2016, economic activity is projected to pick up pace in 2017 and 2018, especially in emerging market and developing economies,” the report said.

“However, there is a wide dispersion of possible outcomes around the projections, given uncertainty surrounding the policy stance of the incoming U.S. administration and its global ramifications.”

The assumptions underpinning the forecast should be more specific by the time of the April 2017 World Economic Outlook, as more clarity emerges on U.S. policies and their implications for the global economy, the report said.

The outlook for advanced economies has improved for 2017–18, reflecting somewhat stronger activity in the second half of 2016 as well as a projected fiscal stimulus in the United States.

Growth prospects have marginally worsened for emerging market and developing economies, where financial conditions have generally tightened.

Near-term growth prospects were revised up for China, due to expected policy stimulus, but were revised down for a number of other large economies—most notably India, Brazil, and Mexico.

The IMF forecast is based on the assumption of a changing policy mix under a new administration in the United States and its global spillovers.

“Staff now project some near-term fiscal stimulus and a less gradual normalization of monetary policy.”

This projection is consistent with the steepening U.S. yield curve, the rise in equity prices, and the sizable appreciation of the U.S. dollar since the November 8 election.

This WEO forecast also incorporates a firming of oil prices following the agreement among OPEC members and several other major producers to limit supply.

While the balance of risks is viewed as being to the downside, there are also upside risks to near-term growth.

Specifically, global activity could accelerate more strongly if policy stimulus turns out to be larger than currently projected in the United States or China.

Notable negative risks to activity include a possible shift toward inward-looking policy platforms and protectionism, a sharper than expected tightening in global financial conditions that could interact with balance sheet weaknesses in parts of the euro area and in some emerging market economies, increased geopolitical tensions, and a more severe slowdown in China.

The report can be viewed here