The International Monetary Fund declared on Tuesday that the “global upswing” in economic activity was strengthening, as it projected global growth would be slightly higher this year than previously forecast.
In its latest World Economic Outlook, the international organization projected that the global economy would grow 3.6% for 2017 and 3.7% in 2018. Both predictions are 0.1 percentage point above previous forecasts, and compare favorably with 2016’s 3.2% global growth rate.
Despite the positive global outlook, IMF analysts kept near-term growth projections for the United States this year and the next modest.
The IMF predicts the United States will achieve 2.2% growth this year, compared with 1.5% in 2016, and 2.3% in 2018, both well below the targets set by the Trump White House.
The IMF also took a tempered view of growth in the United Kingdom, projecting 1.7% growth this year and 1.5% in 2018, largely due to the impacts of Brexit.
The IMF said that the modest outlooks for U.S. and U.K. growth would be offset by “broad-based upward revisions” in the euro area, Japan, emerging Asia, emerging Europe, and Russia.
“The current global acceleration [of economic growth] is notable because it is broad-based — more so than at any time since the start of this decade,” the IMF said in its report. “This breadth offers a global environment of opportunity for ambitious policies that will support growth and raise economic resilience in the future.”
The IMF advised government policymakers to “seize the moment,” noting that the economic recovery “is still incomplete in important respects, and the window for action the current cyclical upswing offers will not be open forever.” One reason the IMF thinks the economic recovery is incomplete is that, within countries, nominal and real wage growth has remained low.
“This wage sluggishness follows many years during which median real incomes grew much more slowly than incomes at the top, or even stagnated,” the IMF said in its report. “Drivers of growth including technological advances and trade have had uneven effects, lifting some up but leaving others behind in the face of structural transformation.”
The resulting higher income and wealth inequalities, according to the IMF, have helped fuel political disenchantment and skepticism about the gains from globalization, putting the economic recovery at risk.
Maurice Obstfeld, the IMF’s economic counsellor, said that while the growth trends were positive overall, “a closer look suggests that the global recovery may not be sustainable.” He cited the facts that “not all countries are participating” and that in many economies inflation remains below target.