The IMF raised its global growth forecast for the first time in nearly two years on Tuesday, saying fading economic headwinds should permit advanced nations to pick up the mantle of growth from emerging markets.
However, the IMF warned richer nations were still growing below full capacity, and it added the specter of deflation to its long list of risks that could derail the nascent recovery.
In an update to its World Economic Outlook report, the IMF predicted the global economy would grow 3.7 percent this year, 0.1 percentage point higher than its projection in October last year. It said it sees growth of 3.9 percent next year.
IMF chief economist Olivier Blanchard said less government austerity and uncertainty, and a healthier financial system, were all allowing growth to speed ahead.
“The basic reason behind the stronger recovery is that the brakes to the recovery are progressively being loosened,” Blanchard told reporters on a conference call.
The IMF forecast higher growth in advanced economies this year, but kept its outlook unchanged for the developing world, where higher exports to rich nations were expected to be offset by weak demand at home.
The US is likely to be one of the bright spots, after a budget deal in the US Congress reduced some of the government spending cuts that had weighed on domestic demand.
US data last month showed a build-up in business inventories, the most since 1998, helped boost third-quarter GDP, and the IMF expects domestic demand to lift growth to 2.8 percent this year. In its previous forecast in October last year, it looked for growth of 2.6 percent.
The IMF also saw a rosier outlook for the UK, amid cheap credit, a boost in consumption and greater confidence. It raised its growth forecast to 2.4 percent this year from 1.9 percent in October last year. It was the largest increase among major economies, when accounting for rounding.
Japan’s prospects also surprised to the upside, as the IMF predicted further fiscal stimulus should help offset some of the impact from a higher consumption tax planned for this spring. However, the IMF said Japan must focus on consumption and investment to keep growth sustainable, rather than relying on government spending and exports.
While the IMF said Japan is unlikely to slip back into deflation, it warned that other rich nations now risk the same problem of sluggish price growth, which can happen when economies linger well below their full potential. Disinflation can turn to economically debilitating deflation if there is a negative shock to economic activity, the IMF said.
A falling spiral of prices would weaken demand by making cash more valuable over time, discouraging consumption. It also increases the burden of debt, a big problem for highly indebted places like the US and the eurozone.
The IMF urged central banks to avoid raising interest rates too soon, and called on the European Central Bank in particular to help sluggish demand by boosting credit growth.
The IMF warned that some developing countries, especially those with large current account deficits or domestic weaknesses, could be hit hard by capital outflows this year as the US Federal Reserve begins to scale back the pace of its asset purchases. The IMF expects the Fed to wait until next year before it raises its policy rate.
The IMF urged vulnerable economies to let their exchange rates depreciate, or consider tighter monetary policy or stronger regulation or supervision.
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
RECORD-BREAKING: TSMC’s net profit last quarter beat market expectations by expanding 8.9% and it was the best first-quarter profit in the chipmaker’s history Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which counts Nvidia Corp as a key customer, yesterday said that artificial intelligence (AI) server chip revenue is set to more than double this year from last year amid rising demand. The chipmaker expects the growth momentum to continue in the next five years with an annual compound growth rate of 50 percent, TSMC chief executive officer C.C. Wei (魏哲家) told investors yesterday. By 2028, AI chips’ contribution to revenue would climb to about 20 percent from a percentage in the low teens, Wei said. “Almost all the AI innovators are working with TSMC to address the
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”