Global econ­omy to grow 3.5pc: IMF

Chronicle (Zimbabwe) - - Business -

GLOBAL eco­nomic growth will ac­cel­er­ate in 2017 as in­vest­ment, man­u­fac­tur­ing and trade re­bound, the In­ter­na­tional Mon­e­tary Fund said on Tues­day as it raised its out­look for the year.

World growth is ex­pected to rise to 3.5 per­cent this year and 3.6 per­cent in 2018, com­pared to 3.1 per­cent last year.

“Stronger ac­tiv­ity and ex­pec­ta­tions of more ro­bust global de­mand, cou­pled with agreed re­stric­tions on oil sup­ply, have helped com­mod­ity prices re­cover from their troughs in early 2016,” ac­cord­ing to a state­ment from the IMF, which is hold­ing its an­nual spring meet­ings in Wash­ing­ton, DC, this week.

The IMF was more pes­simistic in Jan­uary, when it re­leased its last fore­cast. In cut­ting its growth fore­cast for the US and other ad­vanced economies, the IMF said then that the global econ­omy would grow 3.4 per­cent this year ver­sus 3.1 per­cent in 2016.

“Higher com­mod­ity prices have pro­vided some re­lief to com­mod­ity ex­porters and helped lift global head­line in­fla­tion and re­duce de­fla­tion­ary pres­sures,” the IMF said. “Fi­nan­cial mar­kets are buoy­ant and ex­pect con­tin­ued pol­icy sup­port in China and fis­cal ex­pan­sion and dereg­u­la­tion in the United States. If con­fi­dence and mar­ket sen­ti­ment re­main strong, short-term growth could in­deed sur­prise on the up­side.”

Still, “struc­tural im­ped­i­ments,” such as low pro­duc­tiv­ity growth and high in­come in­equal­ity, will likely per­sist and could stall a stronger re­cov­ery, it said.

In a pointed crit­i­cism of na­tion­al­is­tic eco­nomic pro­pos­als in the US and other Euro­pean Union coun­tries, the IMF said: “In­ward-look­ing poli­cies threaten global eco­nomic in­te­gra­tion and the co­op­er­a­tive global eco­nomic or­der, which have served the world econ­omy, es­pe­cially emerg­ing­mar­ket and de­vel­op­ing economies, well.”

The IMF also raised its out­look for the ad­vanced economies, which in­clude the US, the UK, Ger­many, Italy, Spain, Ja­pan and other de­vel­oped na­tions. It now an­tic­i­pates they will grow by two per­cent this year, up slightly from 1.9 per­cent fore­cast in Jan­uary.

Its out­look for the US econ­omy, whose 2017 growth was pro­jected in Jan­uary at 2.3 per­cent, was left un­changed. The US econ­omy grew 1.6 per­cent last year.

Heart­ened by pal­pa­ble signs of growth in the U.S. econ­omy, the Fed­eral Re­serve raised in March its bench­mark short-term rate by a quar­ter per­cent­age point, its sec­ond in­ter­est rate hike in three months. And it sig­naled that more grad­ual hikes are likely.

But the IMF said “a faster-than-ex­pected pace” of in­ter­est rate hikes in the US could tighten fi­nan­cial con­di­tions else­where, and strength­en­ing of the US dol­lar could strain emerg­ing-mar­ket economies with cur­ren­cies that are pegged to the dol­lar.

Emerg­ing-mar­ket economies re­main vul­ner­a­ble as geopo­lit­i­cal ten­sions rise and the use of credit pro­lif­er­ates, the IMF said. China, in par­tic­u­lar, “faces the daunt­ing chal­lenge of re­duc­ing its re­liance on credit growth,” it said.

The IMF also left un­changed its Jan­uary fore­cast for emerg­ing mar­kets, which are an­tic­i­pated to grow 4.5 per­cent in 2017 and 4.8 per­cent in 2018.

China’s growth this year is now es­ti­mated at 6.6 per­cent, up from 6.5 per­cent pro­jected in Jan­uary. — Wires.

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