IMF fore­casts stronger global growth

Iran Daily - - Tse & Global Economy -

The global eco­nomic re­cov­ery is strength­en­ing, ac­cord­ing to the In­ter­na­tional Mon­e­tary Fund (IMF). In its lat­est World Eco­nomic Out­look, the IMF has re­vised its fore­cast for the global econ­omy and is now ex­pect­ing slightly stronger growth, BBC re­ported.

It now pre­dicts growth of 3.6 per­cent this year and 3.7 per­cent in 2018.

The IMF’S fore­cast for the UK is the same as in its July re­port. It ex­pects growth to slow from 1.8 per­cent in 2016 to 1.7 per­cent this year and to 1.5 per­cent in 2018.

Although the UK is an ex­cep­tion to the pat­tern of strength­en­ing growth in the IMF’S as­sess­ment, for this year and next the growth pro­jec­tions are stronger than two other G7 economies, Ja­pan and Italy.

The IMF’S judg­ment on the UK’S prospects re­flects weaker growth in con­sumer spend­ing be­cause of the fall in the value of the pound and the im­pact that had on real, in­fla­tion-ad­justed, in­comes. How­ever, it does say it ex­pects in­fla­tion to de­cline grad­u­ally to the Bank of Eng­land’s two per­cent tar­get.

For the medium term, the re­port said the UK’S growth out­look is highly un­cer­tain and will de­pend in part on the new eco­nomic re­la­tion­ship with the EU and the ex­tent of any in­crease in bar­ri­ers to trade, mi­gra­tion and cross-bor­der fi­nan­cial ac­tiv­ity.

The re­port said the global econ­omy is ex­pe­ri­enc­ing a “wel­come cycli­cal up­turn af­ter dis­ap­point­ing growth over the past few years”.

Sev­eral coun­tries have had their fore­cast up­graded — the largest changes this year are for Canada, Rus­sia (partly be­cause of sta­b­lish­ing oil prices) and Brazil, where the fig­ures are still rather weak, but an im­prove­ment on the sharp con­trac­tions of the pre­vi­ous two years.

There are a small num­ber of down­grades as well, how­ever, and they are sub­stan­tial in the case of In­dia, be­cause of the lin­ger­ing ef­fects of a cur­rency ex­change last year and un­cer­tainty as­so­ci­ated with a new tax.

That said, In­dia’s econ­omy is still ex­pected to see ro­bust growth — not far be­low seven per­cent this year and above that level in 2018.

South Africa also gets a hefty down­grade, with sub­dued growth be­cause of the im­pact of po­lit­i­cal un­cer­tainty on busi­ness and con­sumer con­fi­dence.

Pro­duc­tiv­ity wor­ries

The re­port also warns that the global re­cov­ery is not com­plete and faces risks.

In­fla­tion is too low in many coun­tries. That means that cen­tral banks have lit­tle room to re­spond to fu­ture eco­nomic weak­ness by cut­ting in­ter­est rates as they are al­ready so low — be­cause price rises are so sub­dued.

The IMF has per­sis­tent con­cerns about weak growth in pro­duc­tiv­ity, which im­pairs prospects for ris­ing liv­ing stan­dards.

The rapid ex­pan­sion of credit in China in­creases the risk of sharp slow­down there and the IMF said the govern­ment needs to in­ten­sify its ef­forts to head off that dan­ger.

There’s also a hint of con­cern about the ad­min­is­tra­tion of Pres­i­dent Trump when the re­port said that “un­cer­tainty about pol­icy is more of a con­cern than usual re­flect­ing, for ex­am­ple, dif­fi­cult-to-pre­dict US reg­u­la­tory and fis­cal poli­cies”. be high on the list of fac­tors that en­ter­prise own­ers per­ceive as im­por­tant bar­ri­ers to in­vest­ment. For ex­am­ple, the En­ter­prise Sur­vey for the Mid­dle East and North Africa found po­lit­i­cal in­sta­bil­ity, cor­rup­tion, un­re­li­able elec­tric­ity sup­ply, and in­ad­e­quate ac­cess to fi­nance to be im­por­tant con­sid­er­a­tions; pay­ing taxes or tax rates were not.

Yet, the World Bank has been pro­mot­ing tax cuts and tax com­pe­ti­tion as magic bul­lets to boost in­vest­ment. Not sur­pris­ingly, thanks to its still con­sid­er­able in­flu­ence, tax rev­enues in de­vel­op­ing coun­tries are not ris­ing enough, or worse, con­tinue to fall. Ac­cord­ing to some es­ti­mates, between 1990 and 2001, re­duc­tion in cor­po­rate taxes low­ered coun­tries’ tax rev­enue by nearly 20 per­cent.

In­stead of en­cour­ag­ing tax com­pe­ti­tion, there­fore, the World Bank should help de­vel­op­ing coun­tries im­prove tax ad­min­is­tra­tion to en­hance col­lec­tion and com­pli­ance, and to re­duce eva­sion and avoid­ance.

Ac­cord­ing to OECD Sec­re­tary Gen­eral An­gel Gur­ria, “de­vel­op­ing coun­tries are es­ti­mated to lose to tax havens al­most three times what they get from de­vel­oped coun­tries in aid”.

Global Fi­nan­cial In­tegrity has es­ti­mated that il­licit fi­nan­cial flows of po­ten­tially tax­able re­sources out of de­vel­op­ing coun­tries was $7.85 tril­lion dur­ing 20042013 and $1.1 tril­lion in 2013 alone!

REUTERS

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