Finance

International Monetary Fund releases quarterly update of global economic outlook

International Monetary Fund releases quarterly update of global economic outlook

The IMF update was released on the sidelines of the World Economic Forum in Davos, Switzerland.

This forecast, according to the outlook, reflects the expectation that favorable global financial conditions and strong sentiment will help maintain the recent acceleration in demand, especially in investment, with a noticeable impact on growth in economies with large exports.

However, the International Monetary Fund said that "in light of the increased fiscal deficit, which will require fiscal adjustment down the road, and the temporary nature of some provisions, growth is expected to be lower than in previous forecasts for a few years from 2022 onward, offsetting some of the earlier growth gains".

Global growth, which had languished in the previous years, is steaming ahead as the U.S. economy continues to expand at better-than-expected rates and Asia and Europe continue to recover from the economic slump that marred the past years. "The recent USA tax legislation will contribute noticeably to US growth over the next few years, largely because of the temporary exceptional investment incentives that it offers".

The Saudi economy is also projected to grow by 2.2 percent next year, up 0.6 percent on the previous estimate, it said.

It sees the Indian economy expanding by 7.4% in 2018 and by 7.8% in 2019, much faster than 2017's 6.7%.




The IMF said that China, during the same period is expected to grow at 6.6 percent and 6.4 percent respectively. Consistent with these plans, the country's ongoing and necessary rebalancing process implies lower future growth, Obstfeld said at a news conference in Davos.

Aided by opening up of several key sectors over the last few years, foreign direct investment in India surged 17% to over $25 billion during the first half of the current financial year, even as private investment has remained muted due to excess capacity and high financial stress.

The IMF cited increased investment as businesses take advantage of lower corporate tax rates as it projected USA growth to increase to 2.7 per cent this year, from 2.3 per cent in 2017. "But political leaders and policy makers must stay mindful that the present economic momentum reflects a confluence of factors that is unlikely to last for long", he said, arguing that Donald Trump's tax cuts were likely to only provide a short-term boost to growth.

The International Monetary Fund also estimates that higher domestic demand will mute the response of inflation and, in turn, the Federal Reserve will have a faster pace of interest rate hikes.

"Multilateral cooperation remains vital for securing the global recovery". In an environment of financial market optimism, ensuring financial resilience is imperative, the report said. Forecasts for emerging and developing economies were unchanged.


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