Wednesday 24 May 2017

World economic outlook: Gaining momentum?

WASHINGTON, April 19, 2017

With buoyant financial markets and a long-awaited cyclical recovery in manufacturing and trade under way, world growth is projected to rise from 3.1 per cent in 2016 to 3.5 per cent in 2017 and 3.6 per cent in 2018, the IMF said in its latest World Economic Outlook (WEO) forecast.

But binding structural impediments continue to hold back a stronger recovery, and the balance of risks remains tilted to the downside, especially over the medium term. With persistent structural problems—such as low productivity growth and high income inequality—pressures for inward-looking policies are increasing in advanced economies.

These threaten global economic integration and the cooperative global economic order that has served the world economy, especially emerging market and developing economies, well. Against this backdrop, economic policies have an important role to play in staving off downside risks and securing the recovery.

On the domestic front, policies should aim to support demand and repair balance sheets where necessary and feasible; boost productivity, labour supply, and investment through structural reforms and supply-friendly fiscal measures; upgrade the public infrastructure; and support those displaced by structural transformations such as technological change and globalization.

At the same time, credible strategies are needed in many countries to place public debt on a sustainable path. Adjusting to lower commodity revenues and addressing financial vulnerabilities remain key challenges for many emerging market and developing economies.

A renewed multilateral effort is also needed to tackle common challenges in an integrated global economy.

The world economy gained speed in the fourth quarter of 2016 and the momentum is expected to persist. Activity is projected to pick up markedly in emerging market and developing economies because conditions in commodity exporters experiencing macroeconomic strains are gradually expected to improve, supported by the partial recovery in commodity prices, while growth is projected to remain strong in China and many other commodity importers. In advanced economies, the pickup is primarily driven by higher projected growth in the United States, where activity was held back in 2016 by inventory adjustment and weak investment.

Although changes to the global growth forecast for 2017 and 2018 since the October 2016 WEO are small, there have been meaningful changes to forecasts for country groups and individual countries. In line with stronger-than-expected momentum in the second half of 2016, the forecast envisages a stronger rebound in advanced economies.

And while growth is still expected to pick up notably for the emerging market and developing economies group, weaker than expected activity in some large countries has led to small downward revisions to the group’s growth prospects for 2017. – TradeArabia News Service

Tags: IMF |

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