Strong China
Other countries are picking up the slack. The IMF’s projection for growth in China is 6.7 percent for 2017 -- the same as its estimate made June 14 in an annual staff report, and up 0.1 point from April’s world economic outlook. For 2018 the fund sees Chinese growth at 6.4 percent, an increase of 0.2 points from three months ago. In the staff report, the IMF looked for average annual growth of 6.4 percent in China during 2018 through 2020.
The fund raised its forecast for Japan to 1.3 percent growth this year, up 0.1 point from April, though it projects that the Japanese economy will slow in 2018 to 0.6 percent growth, unchanged from the April forecast.
The euro area as a whole will grow 1.9 percent this year, up 0.2 points from three months ago, and 1.7 percent in 2018, up 0.1 point. Spain appears to be the bright spot in both years.
Canada will lead Group of Seven countries in growth this year, expanding at a 2.5 percent clip, up 0.6 points from April, the IMF said. However, the fund cut its projection for Canadian growth next year to 1.9 percent, down 0.1 point.
While risks to the global outlook are “broadly balanced” in the near term, medium-term risks are tilted to the downside, the IMF said.
“Rich market valuations and very low volatility in an environment of high policy uncertainty raise the likelihood of a market correction, which could dampen growth and confidence,” said the fund, which also cited China’s credit growth and protectionist policies as threats.
The IMF urged advanced countries with weak demand and low inflation to continue supporting growth through monetary and fiscal policy while cautioning central banks against raising borrowing costs too quickly. The fund said widespread protectionism or a “race to the bottom” on financial and regulatory oversight would leave all countries worse off.
This article was provided by Bloomberg News.