The International Monetary Fund (IMF) revised its growth forecasts for the global economy this morning, expecting global gross domestic product to continue expanding at 3.5% this year, and 3.6% in 2018. Although the IMF believes growth will be largely unchanged from its forecast in April, it has made adjustments to growth expectations to a number of countries; believing there could be darker clouds on the horizon. As the statement with the release of the forecast said ‘While risks around the global growth forecast appear broadly balanced in the near term, they remain skewed to the downside over the medium term’.
China is one of the countries where the IMF has raised its growth forecast, expecting 6.7% growth in 2017, and a slight lower 6.4% in 2018. The figures are 0.1% and 0.2% above earlier estimates. Again there was an air of caution with the positive news. Maurice Obstfeld, the IMF's economic counsellor and director of research noted, ‘In the first two quarters of this year, growth has come in very high. Part of this is the general upsurge in world growth and the upsurge in trade in Asia. But there is also a component that has been fuelled by expanding domestic credit, and that's the part that worries us’. Japan was also expected to perform slightly better than previously envisaged, with a revision up to 1.3%, from 1.2% earlier in the year. However Japan’s forecast expansion for 2018 was unchanged at just 0.6%.
The Eurozone projections were also moved up, from 1.7% to 1.9%, with a slight increase in 2018 to 1.7%.
Two countries that had growth revised lower by the IMF were the UK and the US. The US forecast was moved lower to 2.1% for both this year and next. In April the IMF was going for 2.3% this year and 2.5% in 2018. Here again Obstfeld had words of warning. The IMF had previously assumed that the Trump’s administration's stimulus actions would boost US growth, however it now casts doubt on how much of the President’s legislation will actually go though. Obstfeld also warned of the protectionist rhetoric coming out of the US since Trump became President.
The UK was singled out for possibly the gravest concerns by the IMF. UK growth for this year was cut from 2% to 1.7%, and just 1.5% for next year. Obstfeld said ‘Our projection for the United Kingdom this year is lowered, based on the economy’s tepid performance so far’ adding, ‘The ultimate impact of Brexit on the United Kingdom remains unclear’.