Monday, 24 July, 2017

International Monetary Fund foresees stronger China, global growth

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Garry Little | 19 April, 2017, 01:35

In its latest World Economic Update, released today, the fund pushed its growth forecast for 2017 up by 0.1 percentage point to 3.5%, compared to 3.1% a year ago, thanks to positive economic data from Europe and Asia and expectations for higher growth in the US. At the same time, adverse weather conditions and civil unrest threaten several low-income countries with starvation. Forecasts for Japan (1.25%) and the United Kingdom (2%) have also been upgraded. Also forecast to contract in 2017 is Kuwait - by 0.2 per cent, compared with a previous forecast of 2.6 per cent growth, a rebound to 3.5 per cent growth in 2018. The UAE's growth forecast, which is cut to 1.5 per cent in 2017 from 2.5 per cent a year ago, is seen accelerating to 4.4 per cent in 2018, at the fastest pace in the region.

The report said the UK's "principal challenge will be to successfully navigate the exit from the European Union and negotiate new arrangements for economic relations with the European Union and other trading partners".

The unemployment rate had a downward trend, as did non-performing loans in the banking sector, the International Monetary Fund official said.

Forecast for advanced economies was marked up 0.1 percent in 2017 to 2 percent while the forecast for 2018 remains unchanged also at 2 percent.

However, Obstfeld warned: ""Capitulating to those pressures would result in a self-inflicted wound", which would harm countries by pushing prices higher and eroding household income, prompt retaliation, and worsen the global economy".

"Global economic activity is picking up speed, but the potential for disappointments remains high, and momentum is unlikely to be sustained in the absence of efforts by policymakers to implement the right set of policies and avoid missteps", the International Monetary Fund said.

While the Netherlands rejected such an approach earlier this year, the same feelings are thought to have helped drive the UK's Brexit vote and USA president Donald Trump's ascension to the Oval Office. These could in turn spill over to other countries.

"There has been a very strong data release on monthly GDP in early 2017 for Canada, which bodes very well for growth in the early part of the year", Gian Maria Milesi-Ferretti, the IMF's deputy director of research, said from Washington, D.C.

"Public spending is expected to rise as the fiscal deficit target has been increased to 3 percent of GDP in 2017 and provide a stimulus to economic activity", he added.

And French vehicle parts maker Faurecia SA said first-quarter sales rose 9.8% on strong growth in the USA and China. They also expect President Donald Trump to deliver tax cuts and infrastructure spending that could help boost USA economic growth.

The U.S. says its policies or threats don't amount to protectionism, but rather are an effort to rebalance distorted trade relationships.

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