International Monetary Fund raises outlook for Canadian economy, upgrades global economic projections

Posted January 23, 2018

The International Monetary Fund (IMF) on Monday revised its forecast for world economic growth in 2018 and 2019, upwards to 3.9 percent.

The pace of growth of the advanced nations was 1.7% in that year and is expected to have advanced to more than 2% for last year, this year and next.

The International Monetary Fund has lifted its forecasts for global growth, saying momentum is building in global economic activity and Donald Trump's tax cuts in the U.S. are likely to stimulate activity further.

Growth in the Middle East, North Africa, Afghanistan, and Pakistan region is also expected to pick up in 2018 and 2019, but remains subdued at around 3½ percent.

The fund lifted its outlook for the euro zone to 2.2 percent growth in 2018, up 0.3 point from October. "And the ASEAN-5 have gained momentum in response to higher investment and increased exports", Lipton had said.

But forecast growth for the US, Germany, France, Italy and Japan are all pushed upwards this year as global growth is seen hitting 3.9 per cent, the most rapid since the 4.2 per cent expansion in 2011.

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The uptick in growth in 2017 was relatively broad-based, with around 120 economies, representing three quarters of world GDP expanding year-on-year last year, "the broadest synchronised global growth upsurge since 2010", the fund said.

The revision reflects stronger than expected activity previous year, higher projected external demand, and the expected macroeconomic impact of the tax reform, in particular the reduction in corporate tax rates and the temporary allowance for full expensing of investment, it said.

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.

The IMF also warned that a financial-market correction could spoil the party - a possible scenario it raises amid "rich asset valuations and very compressed term premiums". 'Firstly, policy makers should use these circumstances to make the structural or fiscal reforms that are too hard to make in more difficult times, ' she said. It attributed the accelerating growth to "Modinomics", or economic reforms implemented by Prime Minister Narendra Modi.

The IMF also sounded the alarm over the threat of another global recession if governments become complacent about the current growth momentum and fail to take action to address problems and prepare for the next downturn. "In an environment of financial market optimism, ensuring financial resilience is imperative". These have risen by about 20 percent between August 2017 and mid-December 2017, to over $60 per barrel, with some further increase as of early January 2018.

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