International Monetary Fund bumps up global GDP forecasts for 2017 and 2018

International Monetary Fund bumps up global GDP forecasts for 2017 and 2018

The International Monetary Fund (IMF) on Tuesday pared its growth forecast for India by half a percentage point to 6.7% for 2017, blaming the lingering disruptions caused by demonetisation of high value currencies a year ago and the roll out of the Goods and Services Tax (GST).

Globally, the economic picture has brightened a bit, with the world growth for this year projected at 3.6 percent, up from last year's 3.2 percent.

Releasing its latest World Economic Outlook (WEO), the International Monetary Fund said the global growth forecast for 2017 and 2018 - 3.6 percent and 3.7 percent, respectively - is 0.1 percentage point higher in both years than in the April and July forecasts.

Forecasts for euro zone, Japan, China, emerging market Europe and Russian Federation were all revised upwards.

The IMF's judgment on the UK's prospects reflects weaker growth in consumer spending because of the fall in the value of the pound and the impact that had on real, inflation-adjusted, incomes.

The fund expects China's economy to expand by 6.8 per cent this year, up from its previous estimate of 6.7 per cent, due to stronger recorded growth in the first half.

The UK is also the exception among advanced economies when it comes to inflation.

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The report cited "notable pickups in investment, trade, and industrial production, coupled with stronger business and consumer confidence", as central to the strong global recovery.

"A closer look suggests that the global recovery may not be sustainable" and neither policy makers nor markets should be "lulled into complacency", warned Maurice Obstfeld, the IMF's chief economist, in a note accompanying the forecast.

The downward revision to USA growth over the past six months is because of a "major correction" to the IMF's fiscal policy assumptions, it says. The IMF said it saw Turkey's inflation remaining in double-digits at 10.9 percent in 2017, but later falling to 9.3 percent the following year.

The Washington-based institution upgraded every advanced nation except the United Kingdom in its latest set of forecasts and claimed that there was "good cause for greater confidence" in the world economy.

The uptick in growth will result in greater debt levels over the long term, the International Monetary Fund said in a report, raising the prospect of a "sharp growth slowdown in China". GST, "which promises the unification of India's vast domestic market, is among several key structural reforms under implementation that are expected to help push growth above 8% in the medium term", it added.

Explaining the cut, the report said that India's growth momentum slowed because of "the lingering impact" of last year's demonetisation "as well as uncertainty related to the midyear introduction of the country-wide Goods and Services Tax".

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