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 Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract chipmaker, yesterday said its materials management head, Vanessa Lee (李文如), had tendered her resignation for personal reasons. The personnel adjustment takes effect tomorrow, TSMC said in a statement. The latest development came one month after Lee reportedly took leave from the middle of last month. Cliff Hou (侯永清), senior vice president and deputy cochief operating officer, is to concurrently take on the role of head of the materials management division, which has been under his supervision, TSMC said. Lee, who joined TSMC in 2022, was appointed senior director of materials management and
Nvidia Corp CEO Jensen Huang (黃仁勳) on Thursday met with US President Donald Trump at the White House, days before a planned trip to China by the head of the world’s most valuable chipmaker, people familiar with the matter said. Details of what the two men discussed were not immediately available, and the people familiar with the meeting declined to elaborate on the agenda. Spokespeople for the White House had no immediate comment. Nvidia declined to comment. Nvidia’s CEO has been vocal about the need for US companies to access the world’s largest semiconductor market and is a frequent visitor to China.
Hypermarket chain Carrefour Taiwan and upscale supermarket chain Mia C’bon on Saturday announced the suspension of their partnership with Jkopay Co (街口支付), one of Taiwan’s largest digital payment providers, amid a lawsuit involving its parent company. Carrefour and Mia C’bon said they would notify customers once Jkopay services are reinstated. The two retailers joined an array of other firms in suspending their partnerships with Jkopay. On Friday night, popular beverage chain TP Tea (茶湯會) also suspended its use of the platform, urging customers to opt for alternative payment methods. Another drinks brand, Guiji (龜記), on Friday said that it is up to individual
STABLE RESULTS: Despite June’s lower consolidated revenue, second-quarter sales still reached a record high, driven by demand for chips for AI applications Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday reported consolidated sales of NT$263.71 billion (US$9.02 billion) for last month, its second-lowest monthly result this year. The world’s largest contract chipmaker said in a statement that its revenue last month only fared better than the NT$260.01 billion posted in February. Last month’s figure rose 26.9 percent from a year earlier, but slumped 17.7 percent from May, the company said. However, second-quarter revenue reached NT$933.8 billion, a record high for a single quarter, company data showed. The figure represented growth of 11.26 percent from the first quarter and 38.6 percent from a year earlier. Previously, TSMC said that