The International Monetary Fund (IMF) has upgraded its global growth projections for 2017 and 2018 by 0.1% to 3.6% and 3.7%, respectively.
“The global recovery is continuing, and at a faster pace. The picture is very different from early last year, when the world economy faced faltering growth and financial market turbulence,” said Maurice Obstfeld, director of the research department for the IMF, at a press conference to release the October 2017 World Economic Outlook report. “We see an accelerating cyclical upswing boosting the major economies, including Europe, China, Japan, and the United States, as well as emerging Asia.”
The IMF said that with early 2017 growth stronger than expected, its upward revisions are broad-based for the euro area, Japan, China, emerging Europe, and Russia. It said this would more than compensate for downward revisions for the US, the UK, and India.
“After disappointing global growth over the past few years,” said the report, “this recent pickup provides an ideal window of opportunity for policymakers to undertake critical reforms to stave off downside risks, raise potential output, and improve living standards more broadly.”
The IMF also revised its forecast for US growth up to 2.2% in 2017 and 2.3% in 2018, from its July forecast of 2.1% growth for both years. However, those figures remain below the IMF’s April projection of 2.3% for 2017, and 2.5% for 2018.
“Over a longer horizon, US growth is expected to moderate,” said the IMF. “Potential growth is estimated at 1.8%, reflecting the assumption of continued sluggish growth in total factor productivity and diminished growth of the workforce due to population aging.”
Labor force participation rates in most advanced economies are expected to move lower in the coming years due to population aging, according to the IMF. To counter this decline, the IMF said policymakers could raise the statutory retirement age to help close funding gaps in pension systems.
The per-capita output growth for advanced economies is now projected to average only 1.4% per year over the 2017-2022 period, compared with 2.2% per year during 1996 to 2005. The IMF projects that 43 emerging market and developing economies will grow even less in per-capita terms than the advanced economies over the coming five years.
“These economies are diverging rather than converging,” said the report, “going against the more benign trend of declining inequality between countries due to rapid growth and dynamic emerging economies like China and India.”
The report said that although growth in China and other parts of Asia remains strong, “the still-difficult conditions” faced by several commodity exporters in Latin America, the Commonwealth of Independent States, and sub-Saharan Africa show some signs of improvement.
However, the IMF said the economic recovery is not complete, as growth remains weak in many countries, and as inflation stays below its target in most advanced economies.
“Numerous global problems require multilateral action,” said Obstfeld. “Priorities for mutually beneficial cooperation include strengthening the global trading system, further improving financial regulation, enhancing the global financial safety net, reducing international tax avoidance, and fighting famine and infectious diseases.”
Tags: global growth, International Monetary Fund, World Economic Outlook