The IMF kept its growth forecasts for the world economy unchanged for this year and next, although it revised up growth expectations for the eurozone and China.
In an updated World Economic Outlook published yesterday, the IMF said GDP would grow 3.5 percent this year and 3.6 percent next year, unchanged from estimates issued in April.
“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 in updated forecasts released in the Malaysian capital, Kuala Lumpur.
The IMF shaved its forecasts for US growth to 2.1 percent for this year and next, slightly down from projections of 2.3 percent and 2.5 percent respectively just three months ago. The fund reversed previous assumptions that US President Donald Trump administration’s planned stimulus measures would boost US growth, largely because no details of those plans have been made public.
IMF economic counselor and director of research Maurice Obstfeld said the global economy has been the subject of considerable protectionist rhetoric, such as Trump’s proposed tariff on steel imported from China, but such talk 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,” Obstfeld told a news conference.
The IMF said growth in the eurozone was now expected to be slightly stronger next year and pointed to “solid momentum.”
It upgraded GDP growth projections for the eurozone for this year to 1.9 percent, up 0.2 percentage points from April. It said the expected higher growth in the eurozone indicated “stronger momentum in domestic demand than previously expected.”
The IMF revised down its growth forecast for the UK for this year by 0.3 percentage points to 1.7 percent, citing weaker-than-expected activity in the first quarter. It left its forecast for next year unchanged at 1.5 percent.
The IMF said it expected slightly higher growth in Japan this year of 1.3 percent, revised from a forecast of 1.2 percent in April. It cited stronger first-quarter growth buoyed by private consumption, investment and exports. Its forecast for Japan’s growth next year was unchanged at 0.6 percent.
For China, the IMF expected stronger growth of 6.7 percent for this year, up 0.1 percentage points from the April forecast.
It said China’s growth would moderate next year to 6.4 percent, but that estimate was 0.2 percentage points higher from the April forecast on expectations that Beijing would maintain high levels of public investment.
However, Obstfeld expected China’s economic expansion to slow down over the second half of this year as Chinese authorities looked to manage rapid credit growth and non-performing loans.
“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 fueled by expanding domestic credit, and that’s the part that worries us,” Obstfeld said.
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