The global economy is strengthening, but faces threats from super-low inflation and outflows of capital from emerging economies, the IMF said in its World Economic Outlook report on Tuesday.
The lending organization expects the global economy to grow 3.6 percent this year and 3.9 percent next year, up from 3 percent last year. Those figures are just one-tenth of a percentage point below the IMF’s previous forecasts in January.
The acceleration is being driven mostly by strong growth in advanced economies, including the US and the UK, and a modest recovery in the 18 nations that use the euro currency.
Photo: AFP
By contrast, developing nations — particularly Russia, Brazil and South Africa — are now expected to grow much more slowly than the IMF forecast three months ago.
Russia’s economy will likely suffer as a result of its fight with the US and Europe over the Ukraine. Others face high interest rates, which are intended to fight inflation, but could slow growth.
The IMF sharply upgraded its economic growth forecasts for the UK, Germany and Spain. It expects the eurozone to rise 1.2 percent this year and 1.5 percent next year after shrinking 0.5 percent last year. Both estimates are one-tenth of a percentage point higher than the IMF’s January forecasts.
The IMF made no changes to its forecasts for US growth, which it estimates at 2.8 percent this year and 3 percent next year.
“The recovery ... is becoming not only stronger but broader,” IMF chief economist Olivier Blanchard said at a news conference on Tuesday.
The US and European economies are benefiting from smaller government spending cuts and tax increases, Blanchard said. Banks are improving their finances, and investors are increasingly willing to buy European government debt.
Japan, however, is forecast to expand just 1.4 percent next year, down from the IMF’s previous projection of 1.7 percent, and just 1 percent next year. Higher sales taxes are expected to weigh on growth.
Growth in China, the world’s second-largest economy, is expected to continue its slowdown from its double-digit pace of a few years ago.
That will have repercussions for many nations that export raw materials and parts to Chinese factories.
China is projected to expand 7.5 percent this year and 7.3 percent next year, down from 7.7 percent last year, the IMF said.
Last week, IMF managing director Christine Lagarde urged the European Central Bank (ECB) to take “unconventional measures” to push prices up.
Inflation in the 18 countries that use the euro currency fell to an annual rate of 0.5 percent last month. Though consumers can enjoy flat prices, ultra-low inflation can stifle growth.
People and companies postpone purchases knowing that prices will be little changed months later. Debts become harder to pay off. That is a particularly severe problem in Europe, where many governments remain squeezed by debts.
Super-low inflation also raises the risk of deflation — a decline in wages and prices that can cause a recession.
Largarde’s comment drew a rebuke last week from ECB President Mario Draghi.
He said tartly that the IMF “has been ... extremely generous in its suggestions on what we should or should not do” and added that the ECB disagreed.
The 188-nation IMF and its sister organization, the World Bank, will hold their spring meetings in Washington this weekend. Finance ministers and central bank governors from the G20 are to meet today.
WASHINGTON’S INCENTIVES: The CHIPS Act set aside US$39 billion in direct grants to persuade the world’s top semiconductor companies to make chips on US soil The US plans to award more than US$6 billion to Samsung Electronics Co, helping the chipmaker expand beyond a project in Texas it has already announced, people familiar with the matter said. The money from the 2022 CHIPS and Science Act would be one of several major awards that the US Department of Commerce is expected to announce in the coming weeks, including a grant of more than US$5 billion to Samsung’s rival, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), people familiar with the plans said. The people spoke on condition of anonymity in advance of the official announcements. The federal funding for
HIGH DEMAND: The firm has strong capabilities of providing key components including liquid cooling technology needed for AI servers, chairman Young Liu said Hon Hai Precision Industry Co (鴻海精密) yesterday revised its revenue outlook for this year to “significant” growth from a “neutral” view forecast five months ago, due to strong demand for artificial intelligence (AI) servers from cloud service providers. Hon Hai, a major assembler of iPhones that is also known as Foxconn, expects AI server revenues to soar more than 40 percent annually this year, chairman Young Liu (劉揚偉) told investors. The robust growth would uplift revenue contribution from AI servers to 40 percent of the company’s overall server revenue this year, from 30 percent last year, Liu said. In the three-year period
LONG HAUL: Largan Energy Materials’ TNO-based lithium-ion batteries are expected to charge in five minutes and last about 20 years, far surpassing conventional technology Largan Precision Co (大立光) has formed a joint venture with the Industrial Technology Research Institute (ITRI, 工研院) to produce fast-charging, long-life lithium-ion batteries for electric vehicles, mobile electronics and electric storage units, the camera lens supplier for Apple Inc’s iPhones said yesterday. Largan Energy Materials Co (萬溢能源材料), established in January, is developing high-energy, fast-charging, long-life lithium-ion batteries using titanium niobium oxide (TNO) anodes, it said. TNO-based batteries can be fully charged in five minutes and have a lifespan of 20 years, a major advantage over the two to four hours of charging time needed for conventional graphite-anode-based batteries, Largan said in a
Taiwan is one of the first countries to benefit from the artificial intelligence (AI) boom, but because that is largely down to a single company it also represents a risk, former Google Taiwan managing director Chien Lee-feng (簡立峰) said at an AI forum in Taipei yesterday. Speaking at the forum on how generative AI can generate possibilities for all walks of life, Chien said Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) — currently among the world’s 10 most-valuable companies due to continued optimism about AI — ensures Taiwan is one of the economies to benefit most from AI. “This is because AI is