Sci-tech

International Monetary Fund raises global growth forecasts but warns against protectionism, relaxing banking rules

International Monetary Fund raises global growth forecasts but warns against protectionism, relaxing banking rules

Ahead of a meeting of world finance chiefs in Washington this week, the International Monetary Fund released on Tuesday its flagship report on the world economy, forecasting the US economy would grow at 2.3% this year and 2.5% in 2018 - a faster pace than last year's 1.6%.

In its latest World Economic Outlook (WEO), the International Monetary Fund predicted that the Chinese economy will grow at 6.6 percent in 2017 and 6.2 percent in 2018, respectively up 0.1 percentage and 0.2 percentage from its last WOE report in January, or up 0.4 percentage and 0.2 percentage point from its forecasts last October.

Among the developed economies, the US economy is expected to grow by 2.3 percent in 2017 and 2.5 percent in 2018, the same forecast as that in January; the growth forecast for the euro-zone was raised by 0.1 percentage points to 1.7 percent in 2017; the Japanese economy is expected to grow by 1.2 percent in 2017, 0.4 percentage points higher than its January forecast, with growth slowing to 0.6 percent in 2018. At the same time, adverse weather conditions and civil unrest threaten several low-income countries with starvation.

"The world economy may be gaining momentum, but we can not be sure that we are out of the woods", said Mr. Obstfeld.

The agency, however, projected that the USA economy is expected to grow at 2.3 per cent in President Donald Trump's first year in office.

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

Inflation is expected to climb from the present uncomfortably low rate of 1.5 per cent to 2 per cent this year and 2.6 per cent in 2018. With persistent structural problems - such as low productivity growth and high income inequality - pressures for inward-looking policies are increasing in advanced economies.

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The institute led by Christine Lagarde revised upwards its forecasts for the USA economy on expectations that fiscal policy will be eased, but it cautioned against the new administration's protectionist views.

Consumer price inflation across advanced economies is projected to pick up to 2% on average, more than twice the previous year, and is gathering pace in emerging markets, too. "These actions would strengthen the transmission of monetary policy accommodation to the real economy and facilitate the consolidation and restructuring of the banking sector", the IMF said in its report.

The warnings follow events like the Brexit vote and the U.S. election of President Donald Trump, which have promoted more domestically-focused policies on business and trade.

"Whether the current momentum will be sustained remains a question mark", Obstfeld said. "On the other hand, the world economy still faces headwinds", Obstfeld said.

"Public spending is expected to rise as the fiscal deficit target has been increased to 3 percent of GDP in 2017 and provide a stimulus to economic activity", he added.

The IMF said stronger growth is being fueled by a "long-awaited" recovery in investment, manufacturing and trade.

The U.S. says its policies or threats don't amount to protectionism, but rather are an effort to rebalance distorted trade relationships. They also expect President Donald Trump to deliver tax cuts and infrastructure spending that could help boost US economic growth.


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