IMF foresees global economy accelerating to 3.5 percent in 2017

Cornelia Mascio
Aprile 20, 2017

In its latest World Economic Outlook, the Fund said that chronically weak advanced economies are expected to benefit from a cyclical recovery in global manufacturing and trade that started to gain momentum last summer.

Merchandise exports rebounded to a 17.4% growth in the first two months of the year, recovering from a 4.2% decline seen in the comparable year-ago period, based on Philippine Statistics Authority data. If enacted, the International Monetary Fund said, it expected the USA debt ratio to increase continuously over the next five years.

Forecasts for the USA, 2.3 percent for 2017 and 2.5 percent for 2018, are the same as in the January report.

Gasper said globalisation and technological change have been major drivers of economic growth and cross country convergence.

In his foreword to the report, Obstfeld points to the turn to protectionism "leading to trade warfare" with "zero-sum" policy approaches that "could undermine worldwide trading relationships, along with multilateral co-operation more generally".

Economies in the developing world continue to provide most of the impetus to global growth, led by China and India.

Protectionist candidates are polling well ahead of the first round of the French elections on Sunday, while in Britain and the USA 2016 saw votes for Brexit and Donald Trump that were partly driven by isolationism.

He cited the subdued trend productivity growth across the world economy, and also raised the uncertainties from macroeconomic policies in the USA and China, the world's two largest economies.

The forecast for this year would be a marked improvement on last year's 3.1%.

The IMF estimated emerging markets and developing economies will grow by 4.5 percent in 2017 and 4.8 percent in 2018, the same forecast as that of January.

Combined with the slow recovery from recent economic crises, this has affected people on lower incomes and led to growing disillusionment with globalisation the, International Monetary Fund says.

In contrast, Italy will continue bumping along - at 0.8 percent in both 2017 and 2018 after 0.9 percent last year, while Spain growth would slump - from 3.2 percent in 2016 to 2.6 percent and then 2.1 percent this year and next.

"Global economic activity is picking up speed, but the potential for disappointments remains high, and momentum is unlikely to be sustained in the absence of efforts by policymakers to implement the right set of policies and avoid missteps", the report said.

"The modest recovery is projected to be supported by a mildly expansionary fiscal stance, accommodative financial conditions, a weaker euro, and beneficial spillovers from a likely United States fiscal stimulus".

China faces a "daunting challenge of reducing its reliance on credit growth" and the consequences of failing to do so are serious, it added.

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