IMF keeps growth forecasts for world economy unchanged

KUALA LUMPUR • The International Monetary Fund (IMF) kept its growth forecasts for the world economy unchanged for this year and next, but revised upwards growth expectations for the euro zone and China.

In an updated World Economic Outlook out yesterday, the IMF said global gross domestic product (GDP) would grow 3.5 per cent this year and 3.6 per cent next year, unchanged from April estimates.

"While risks around the global growth forecast appear broadly balanced in the near term, they remain skewed to the downside over the medium term," the IMF said.

The IMF shaved its forecasts for US growth to 2.1 per cent for this year and next, slightly down from projections of 2.3 per cent and 2.5 per cent, respectively, just three months ago. The Fund reversed previous assumptions that the Trump administration's planned stimulus measures would boost US growth, largely because no details of those plans have been made public.

IMF economic counsellor and director of research Maurice Obstfeld said the global economy has been the subject of considerable protectionist rhetoric, such as President Donald Trump's proposed tariff on China-imported steel, but it had yet to translate into much action.

"What will happen in the future, we don't know. These threats are in our downside thinking. They're not built into our baseline (forecast) because hopefully they don't happen, but there are risks," Mr Obstfeld told a news conference.

The IMF said growth in the euro zone was now expected to be slightly stronger next year.

  • 3.5%

    The IMF's forecast of world GDP growth this year.

  • 3.6%

    The IMF's forecast of world GDP growth next year.

It upgraded 2017 GDP growth projections for the euro zone to 1.9 per cent, up 0.2 percentage point from April. The IMF said euro zone growth would be slightly stronger at 1.7 per cent, a 0.1 percentage point change from just three months ago.

It said the expected higher growth in the euro zone indicated "stronger momentum in domestic demand than previously expected".

The IMF lowered its forecast for Britain for this year by 0.3 percentage point to 1.7 per cent, citing weaker-than-expected activity in the first quarter. Its forecast for next year was unchanged at 1.5 per cent.

The IMF said it expected slightly higher growth in Japan this year of 1.3 per cent, revised from a forecast of 1.2 per cent in April. For China, it expected stronger growth of 6.7 per cent this year, up 0.1 percentage point from the April forecast.

It said China's growth would still moderate next year to 6.4 per cent, but noted that the estimate was up 0.2 percentage point from the April forecast, on expectations that Beijing would maintain high levels of public investment.

REUTERS

A version of this article appeared in the print edition of The Straits Times on July 25, 2017, with the headline 'IMF keeps growth forecasts for world economy unchanged'. Print Edition | Subscribe