The Economy

IMF Boosts Growth Forecast for 2017 to 3.5%

In its latest economic outlook, the fund warns that protectionist policies "threaten global economic integration and the cooperative global economi...
Matthew HellerApril 20, 2017
IMF Boosts Growth Forecast for 2017 to 3.5%

The International Monetary Fund has raised its outlook for world economic growth while denouncing protectionist policies as a threat to global economic integration and cooperation.

In its latest World Economic Outlook, the IMF forecast a growth rate of 3.5% for 2017 and 3.6% in 2018, compared with 3.1% in 2016. It cited the post-election surge in confidence in the U.S., better prospects in large emerging markets and an uptick in global trade.

After growing 2.2% last year, global trade volume will expand 3.8% this year and 3.9% in 2018, the fund predicted.

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“There has been a stream of continuing positive data that we have seen since the middle of 2016,” Maurice Obstfeld, the IMF’s chief economist, said at a news conference. “This pickup in manufacturing, industrial production and trade is fueling our confidence that this year and next year will be substantially better than 2016.”

The fund also reiterated its view that trade is crucial to the economy, noting that “With persistent structural problems — such as low productivity growth and high income inequality — pressures for inward-looking policies are increasing in advanced economies.”

“These threaten global economic integration and the cooperative global economic order that has served the world economy, especially emerging market and developing economies, well,” it said.

Christine Lagarde, the IMF’s managing director, warned last week that the “sword of protectionism” threatened world economic expansion. According to Obstfeld, protectionism “would result in a self-inflicted wound that would lead to higher prices for consumers, lower productivity and therefore, lower overall real income for households.”

“Via papers, speeches and privately expressed concerns, the IMF has done little to disguise its fear that anti-trade talk could derail a global economic recovery,” The New York Times reported.

The fund held its 2017 U.S. growth forecast steady at 2.3%, which still represents a substantial increase from 1.6% growth in 2016, partly due to expectations that Trump will cut taxes and increase government spending.

Developing nations were predicted to expand at a 4.5% rate this year and 4.8% in 2018, a marked improvement from 4.1 percent growth in 2016.