IMF lowers India's growth forecast over demonetisation, GST even as global economic recovery picks up pace

Washington: The International Monetary Fund (IMF) on Tuesday said the global economic recovery is continuing at a faster pace as it upgraded its growth projection to 3.6 percent for this year, citing an upswing in countries like China, Japan, Russia, and some emerging economies in Europe. Releasing its latest World Economic Outlook (WEO), the IMF  said 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 eurozone, Japan, China, emerging Europe, and Russia. "These more than offset downward revisions for the United States, the United Kingdom, and India," the report said.

Representational image. AFP

Representational image. AFP

"The global recovery is continuing, and at a faster pace," Maurice Obstfeld, the IMF's Economic Counsellor and Director of Research, told reporters at a news conference held at the IMF headquarters ahead of the annual meetings of the IMF and the World Bank in Washington.

Obstfeld said for 2017, most of the upgrade owes to brighter prospects for the advanced economies, whereas for 2018's positive revision, emerging markets and developing economies play a relatively bigger role.

"Notably, we expect sub-Saharan Africa, where growth in per capita incomes has on average stalled for the past two years, to improve overall in 2018," he said. According to the IMF official, the current global acceleration is also notable because it is broad-based - more so than at any time since the start of this decade.

This breadth offers a global environment of opportunity for ambitious policies that will support growth and raise economic resilience in the future. Policymakers should seize the moment as the recovery is still incomplete in important respects, and the window for action the current cyclical upswing offers will not be open forever, he said.

Of the view that global recovery is still incomplete, Obstfeld argued that the action to make necessary changes should take place now as these are the good times. "Success requires a three-pronged approach in the context of completing and refining the important financial stability reforms undertaken since the global crisis, without weakening them," he said.

In line with stronger-than-expected momentum in the first half of 2017, the IMF forecast sees a stronger rebound in advanced economies in 2017 (to 2.2 percent versus 2 percent foreseen in April), driven by stronger growth in the eurozone, Japan, and Canada.

In contrast, compared with the April 2017 WEO forecast, growth has been marked down for 2017 in the UK and for both 2017 and 2018 in the US, implying a 0.1 percentage-point aggregate growth downgrade for advanced economies in 2018.

Activity in the UK slowed more than anticipated in the first half of 2017; as for the US, given the significant policy uncertainty, the forecast now uses a baseline assumption of unchanged policies, whereas in April it assumed a fiscal stimulus driven by then-anticipated tax cuts.

Growth prospects for emerging and developing economies are marked up by 0.1 percentage point for both 2017 and 2018 relative to April, primarily owing to a stronger growth projection for China, the report said.

The country's 2017 forecast (6.8 percent, against 6.6 percent in April) reflects stronger growth outturns in the first half of 2017 as well as more buoyant external demand. For 2018, the revision mainly reflects an expectation that the authorities will maintain a sufficiently expansionary policy mix to meet their target of doubling real GDP between 2010 and 2020, it said.

Updated Date: Oct 10, 2017 20:09 PM

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