SEOUL: The IMF overturned a summer downgrade to forecast the USA economy would now grow by 2.2% this year, with total world growth expectations rising 0.1% to 3.6% as a “global cyclical upswing” continued. However, the Fund said the structural reforms undertaken by the Prime Minister Narendra Modi-led government would trigger a recovery-above 8% in the medium term. In its latest World Economic Outlook, the organisation said it still expects United Kingdom growth to drop to 1.7% in 2017 from 1.8% in 2016, and slow even further in 2018 to 1.5%. In its South Asia Economic Focus (Fall 2017) released on Monday, the World Bank reduced India’s GDP growth forecast to 7% for 2017-18 from 7.2% estimated earlier, blaming disruptions caused by demonetisation and the implementation of the GST, while maintaining at the same time that the economy would claw back to grow at 7.4% by 2019-20.
China’s slower transition from an investment-based economy to a consumption-based one, the report said, “comes at the cost of further large increases in debt”. Emerging and developing countries are forecast to grow at a more robust 4.6 percent, unchanged from July’s prediction. It means unemployment is expected to remain at its present level of 5.6 per cent for this year, rather than falling to 5.2 per cent as earlier envisaged. The forecasts for both years would mark the fastest global growth since 2011. “The recovery is still incomplete in important respects and the window for action the current cyclical upswing offers will not be open forever”, Obstfeld said. In Britain, however, the weakening pound has shrunk household incomes and future relations with Europe remain in considerable doubt following voters’ decision a year ago to exit the European Union. Economic growth in the euro zone was revised upwards from the July forecast by 0.2 percentage points for both 2017 and 2018 to 2.1 percent and 1.9 percent respectively, reflecting an export revival, stronger domestic demand due to accommodative financial conditions and a lowering of political risk.
The IMF raised its call on growth in China to 6.8 percent this year and 6.5 percent in 2018, up 0.1 point in each year compared with July. But the Trump administration’s policy proposals for tax cuts and stimulus appear mired in uncertainty. “Japan should withdraw fiscal support very gradually, including through a gradual increase in the consumption tax rate over several years”, the International Monetary Fund report said. Faster-than-expected interest rate hikes in the United States or Europe, commercial credit troubles in China, persistently low inflation in the developed world, a whole-sale rollback of post-crisis financial industry rules, a sudden shift toward protectionism and geopolitical tensions could all weigh on growth – making reforms much harder. Those with budget surpluses should spend on education and infrastructure. Looking forward, the Fund warned that potential major disruptions to its global outlook could come from “difficult-to-predict” US regulatory, trade and fiscal policies, and from disruptions relating to Britain’s exit from the European Union, as well from central banks raising interest rates too quickly.
