International Monetary Fund raises global growth forecast, warns against protectionism

Posted April 19, 2017

The IMF's latest summary of the prospects for global growth, published Tuesday, predicts that the United Kingdom economy will expand in 2017 by 2 percent, up 0.5 percent from its January forecast.

"Adjusting to lower commodity revenues and addressing financial vulnerabilities remain key challenges for many emerging market and developing economies".

It also came ahead of this week's gathering of central bank governors and finance ministers for the 2017 IMF/World Bank annual spring meeting in Washington.

The IMF's forecast for 2017 was 6.6 per cent, compared to a 6.5 per cent estimate in January, and 6.2 per cent next year compared to 6.0 per cent.

World growth is expected to rise from 3.1 per cent in 2016 to 3.5 per cent in 2017 and 3.6 per cent in 2018, slightly above the October, 2016, WEO forecast.

"Thus, there was a small surplus of about a 0.3 percent of GDP during the first half of the fiscal year.", Villafuerte said in the brief report. It maintained the 2018 growth forecast for those economies unchanged at 2 percent.

It put Britain on 2.0 percent this year, revised up sharply as the economy appears to have weathered the Brexit shock so far but falling away to 1.5 percent in 2018.

The rosy picture expected by the International Monetary Fund for the Philippine economy in 2017 mirrored its optimism on the global economy, as the International Monetary Fund upped its growth forecast for the global economy to 3.5 percent in 2017, from the earlier 3.4 percent.

Also, inward-looking policies proposed by certain advanced economies, could threaten global economic integration and collaborative global economic order.

"The medium-term outlook, however, continues to be clouded by increasing resource mis-allocation and growing", said the report, according to which the global economic activity is picking up with a long awaited cyclical recovery in investment, manufacturing, and trade.

The forecasts for India were unchanged at 7.2 percent this year and 7.7 percent next.

The International Monetary Fund (IMF) has said the overall fiscal deficit to Gross Domestic Product (GDP) in 2016/17 is projected to be below the targeted figure by nearly half.

The report said the increased growth forecasted for China reflected stronger-than-expected policy support.

"At the same time, however, US fiscal policy still seems likely to turn more expansionary over the next couple of years". And French auto parts maker Faurecia SA said first-quarter sales rose 9.8% on strong growth in the US and China.

"Binding structural impediments continue to hold back a stronger recovery, and the balance of risks remains tilted to the downside, especially over the medium term".

Nikita Shah, global economist at analyst firm Capital Economics, noted that despite the IMF's previous "optimistic bias", the firm believes its current forecasts for growth are "about right".

"One salient threat is a turn toward protectionism, leading to trade warfare", Obstfeld said, adding this "would result in a self-inflicted wound that would lead to higher prices for consumers, lower productivity and therefore, lower overall real income for households".