IMF 2017 Economic Outlook Affirms 3.5% World Growth

The International Monetary Fund published its 1st quarter 2017 Economic Outlook on Sunday, January 15. The forecast was upbeat, and pointed to expectations for “fiscal easing” and slower “normalization of monetary policy” as two of the principal catalysts for the positive view.

The report, titled “A Shifting Global Economic Landscape”, says that its forecast was “based on the assumption of a changing policy mix under a new administration in the United States and its global spillovers”.

It cites a stronger outlook for advanced economies based on projected fiscal stimulus in the United States.

Among the risks cited were:

Risks to the global growth outlook are two sided but are assessed to be skewed to the downside, especially over the medium term:

  • “Recent political developments highlight a fraying consensus about the benefits of cross-border economic integration. A potential widening of global imbalances coupled with sharp exchange rate movements, should those occur in response to major policy shifts, could further intensify protectionist pressures. Increased restrictions on global trade and migration would hurt productivity and incomes, and take an immediate toll on market sentiment.
  • In those advanced economies where balance sheets remain impaired, an extended shortfall in private demand and inadequate progress on reforms (including bank balance sheet repair) could lead to permanently lower growth and inflation, with negative implications for debt dynamics.
  • In addition to the risks already mentioned in the previous section, underlying vulnerabilities remain among some other large emerging market economies. High corporate debt, declining profitability, weak bank balance sheets, and thin policy buffers imply that these economies are still exposed to tighter global financial conditions, capital flow reversals, and the balance sheet implications of sharp depreciations. In many low-income economies, low commodity prices and expansionary policies have eroded fiscal buffers and led in some cases to a precarious economic situation, heightening their vulnerability to further external shocks.”

“More broadly, accommodative macroeconomic policies must be accompanied by and support structural reforms that can counteract waning potential growth—including efforts to boost labor force participation, encourage investments in skills, improve the matching process in labor markets, liberalize entry into closed professions, increase dynamism and innovation in product and service markets, and promote business investment, including in research and development,” the report concluded.

James West

Editor and Publisher

James West founded Midas Letter in 2008 and has since been covering the best of Canadian and US small cap companies. He covers global economics, monetary policy, geopolitical evolution, political corruption, commodities, cannabis and cryptocurrencies. As an active market participant, James is not a journalist and is invariably discussing markets...
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