International Monetary Fund revises up 2019 Asian growth due to India's strength

Ann Santiago
January 23, 2018

It, however, had modest growth upgrade for Nigeria in the two-year forecast horizon.

The International Monetary Fund will release its quarterly update to the global economic outlook today. The recent U.S. tax legislation will contribute noticeably to USA growth over the next few years, largely because of the temporary exceptional investment incentives that it offers, he said. The Washington-based lender also revised its forecast for global economic expansion in 2018 and 2019 to 3.9%, both 0.2 percentage points higher than the October projections and stronger than its estimate of a revised 3.7% expansion rate for 2017.

The study also finds that the tax reform in the United States and the fiscal stimulus that flows from that will also spillover favorably into America's trading partners-particularly Mexico and Canada.

For the year 2019, the outlook represents a 0.1 percentage point downgrade for Britain. The IMF said it was the "broadest synchronized global growth upsurge since 2010" when the world enjoyed a strong, but ultimately fleeting, snapback from the financial crisis.

"Trade is again growing faster than global income, driven in part by higher global investment, and commodity prices have moved up, benefiting those countries that depend on commodity exports", Obstfeld said.

The growth forecast for the 19-nation eurozone was revised up 0.3 points to 2.2 percent in 2018 and 0.3 points to 2.0 percent in 2019 due to the stronger momentum in domestic demand and higher external demand.

An important feature of the tax reforms is the reduction in the corporate tax rate from 35 percent to 21 percent, which gives USA companies an incentive to bring back their holdings stashed away overseas. The region continues to account for over half of world growth.

The IMF's United Kingdom forecast for 2018 is unchanged at 1.8 per cent.

However, the rosier outlook came with a major caveat on financial markets, which the International Monetary Fund warned could be at the risk of a confidence-shaking correction. "A possible trigger is a faster-than-expected increase in advanced economy core inflation and interest rates as demand accelerates", it stated.

But the changes could also widen the USA trade deficit, strengthen the dollar and affect global investment flows, the IMF said, warning that the benefits of the tax package will be short-lived and that growth in the world's largest economy will slow from 2022 onwards.

Corruption allegations under the leadership of President Jacob Zuma have hurt investor confidence in South Africa, with economic growth slowing to a near-standstill in recent years. In an environment of financial market optimism, ensuring financial resilience is imperative, the report said.

"The improved growth momentum means that fiscal policy should increasingly be designed with an eye on medium-term goals - ensuring fiscal sustainability and bolstering potential output".

"Multilateral cooperation remains vital for securing the global recovery".

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