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 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.