Anti-glob­al­i­sa­tion forces a risk to world eco­nomic re­cov­ery, says the IMF

Con­cerns over un­cer­tain out­look means UK misses out on up­grade to global growth fore­casts

The Daily Telegraph - Business - - Business - By Anna Isaac

THE in­creas­ing mo­men­tum be­hind anti-glob­al­i­sa­tion move­ments is one of the main threats to the re­cov­er­ing global econ­omy, putting pro­duc­tiv­ity and liv­ing stan­dards at risk, ac­cord­ing to the In­ter­na­tional Mone­tary Fund.

The lat­est fore­casts for fu­ture eco­nomic health are based on a “be­nign global fi­nan­cial en­vi­ron­ment and a re­cov­ery in ad­vanced economies”, which are driv­ing a strength­en­ing in eco­nomic global ac­tiv­ity, the IMF re­port claimed.

Global growth is pro­jected to rise to 3.6pc in 2017 and 3.7pc in 2018, mark­ing an im­prove­ment of 0.1 per­cent­age points on the April fore­cast from the IMF. The out­look for emerg­ing mar­kets was also very pos­i­tive, with ex­pec­ta­tions for a 4.6pc ac­cel­er­a­tion in growth in 2017, and 4.9pc in 2018, largely driven by China’s econ­omy.

How­ever, poorer than ex­pected per­for­mance in the Bri­tish econ­omy for the first half of 2017 led to the IMF con­firm­ing its July down­grade of UK growth by 0.3 per­cent­age points to 1.7pc for the cur­rent year. This fall was due to lower lev­els of pri­vate con­sump­tion, caused by a weaker pound squeez­ing house­hold in­comes. It also noted that the medium-term out­look for the UK was un­cer­tain, and would de­pend on its fu­ture trad­ing re­la­tion­ship with the EU. The fund left its fore­cast of 1.5pc UK growth in 2018 un­changed.

The euro area re­cov­ery is ex­pected to gather strength this year, with growth pro­jected to rise to 2.1pc in 2017, be­fore slow­ing to 1.9pc in 2018. Ger­many and Spain re­ceived pre­dic­tions of 2pc and 3.1pc growth re­spec­tively, with France lower at 1.6pc, ris­ing to 1.8pc in 2018. Italy’s growth was ex­pected to soften from 1.5pc in 2017 to 1.1pc in 2018.

In ma­jor economies, any neg­a­tive im­pact from a grad­ual rise in long-term in­ter­est rates is ex­pected to be off­set by an eas­ing of lend­ing con­di­tions. In­fla­tion did present a risk to the pace of the global re­cov­ery, how­ever. Of par­tic­u­lar con­cern was “pro­longed be­low-tar­get in­fla­tion” that, the IMF ar­gued, could re­duce the ca­pac­ity of cen­tral banks to lower real in­ter­est rates in an­other eco­nomic down­turn.

While prospects for growth were largely very op­ti­mistic, the re­port warned that low lev­els of growth in av­er­age wages since the fi­nan­cial cri­sis and a grow­ing gap be­tween the high­est and low­est earn­ers had cre­ated a sense of “dis­il­lu­sion­ment with glob­al­i­sa­tion”.

The US and the eu­ro­zone were at most risk from the anti-glob­al­i­sa­tion threat. If growth in these eco­nomic ar­eas fails to be­come more in­clu­sive it could re­move the po­lit­i­cal con­sen­sus needed to press ahead with mar­ket­friendly re­forms.

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