IMF Updates World Economic Outlook- Raises Global Outlook to 3.6% from April projection of 3.5%; Some caution over medium term outlook (2018-19)
- The pickup in growthprojected in the April 2017 World Economic Outlook (WEO) is strengthening. The global growth forecast for 2017 and 2018—3.6 percent and 3.7 percent, respectively—is 0.1 percentage point higher in both years than in the April and July forecasts. Notable pickups in investment, trade, and industrial production, coupled with strengthening business and consumer confidence, are supporting the recovery.
- With growth outcomes in the first half of 2017 generally stronger than expected, upward revisions to growth are broad based, including for the euro area, Japan, China, emerging Europe, and Russia. These more than offset downward revisions (from April outlook) for the United States, the United Kingdom, and India.
- The outlook for advanced economies has improved, notably for the euro area, but in many countries inflation remains weak, indicating that slack has yet to be eliminated, and prospects for growth in GDP per capita are held back by weak productivity growth and rising old-age dependency ratios.
- Risks to the baseline are broadly balanced in the short term but skewed to the downside in the medium term.
- Notes China credit, European banking sector and low inflation as risks to the global economies.
- In advanced economies, monetary policy should remain accommodative until there are firm signs of inflation returning to targets. At the same time, stretched asset valuations and increasing leverage in some market segments bear close monitoring, including through proactive micro- and macroprudential supervision, as necessary.
- Headline consumer price inflation has softened since the spring as the boost to prices from the oil price recovery of 2016 has faded and the decline in oil prices (between March and July) has started to exert downward pressure. Expectations of consumer price inflation for the year have therefore diminished, especially in emerging market and developing economies.
- muted growth in nominal wages in recent years partly reflects sluggishness in labor productivity.
- In the medium term, growth is expected to soften once gaps close (mostly expected in 2018--19) and output returns to growing at the same rate as its potential. Potential growth will be increasingly held back by slower growth in workforces as populations age and an increasing share of people enter retirement.
- Fiscal policy at the global level is projected to remain broadly neutral in 2017 and 2018.
- World growth is projected to increase from 3.2 percent in 2016 to 3.6 percent in 2017 and 3.7 percent in 2018—an upward revision of 0.1 percentage point for both 2017 and 2018 relative to April. Economic activity is projected to pick up speed in all country groups except for the Middle East, and forecasts of the strength of the outlook by region have changed only modestly.
- Growth is forecast to increase strongly in emerging market and developing economies, from an upwardly revised 4.3 percent in 2016 to 4.6 percent in 2017 and 4.9 percent in 2018, a 0.1 percentage point increase for 2017 and 2018 relative to the April forecast. The upward revisions to the growth forecast primarily reflect stronger projected activity in China and in emerging Europe for 2017 and 2018.
- As discussed earlier, although commodity importers account for the lion's share of growth in emerging market and developing economies, the projected increase in growth from 2016 is driven primarily by stronger projected growth for commodity exporters, most notably Brazil and Russia, that experienced severe macroeconomic strains during 2015--16