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IMF Says Global Recovery Strengthening, But Incomplete

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The global economic upswing is strengthening and has become broad-based, presenting a window of opportunity for policymakers for reforms, but the recovery is still incomplete and may not last forever, the International Monetary Fund said Tuesday.

In its latest biannual World Economic Outlook, the Washington-based lender raised the global growth forecast for this year to 3.6 percent from 3.5 percent and the outlook for next year to 3.7 percent from 3.6 percent.

In an interim WEO update in July, global growth projections were left unchanged.

These are stronger than the 3.2 percent expansion in 2016, which was the weakest since the global financial crisis, the IMF said.

"Notable pickups in investment, trade, and industrial production, coupled with strengthening business and consumer confidence, are supporting the recovery," the IMF report said.

The breadth of the latest upswing offers a global environment of opportunity for ambitious policies that will support growth and raise economic resilience in the future, Maurice Obstfeld, IMF's economic counselor and research director, said in his blog.

"Policymakers should seize the moment: the recovery is still incomplete in important respects, and the window for action the current cyclical upswing offers will not be open forever," he added.

The IMF expects economic activity to pick up speed in all country groups except for the Middle East, and said the forecasts of the strength of the outlook by region have changed
only modestly.

The advance economies' growth forecast for this year was revised up to 2.2 percent, while the projection for 2018 was left unchanged at 2 percent.

The U.S. economy is projected to grow 2.2 percent this year versus 2.1 percent seen in a WEO update in July. Next year, growth is seen edging up to 2.3 percent versus 2.1 percent predicted in July.

In its full WEO in April, the forecasts were 2.3 percent and 2.5 percent, respectively.

"The projection of a continuation of near-term growth that is moderately above potential reflects very supportive financial conditions and strong business and consumer confidence," the IMF said. "Over a longer horizon, US growth is expected to moderate."

Eurozone is forecast to expand 2.1 percent this year, which is faster than the 1.7 percent predicted in April and 1.9 percent seen in July. Next year, the economy is seen growing 1.9 percent versus 1.6 percent forecast in April and 1.7 percent in July.

The stronger outlook was attributed to an acceleration in exports amid a broader pickup in global trade and continued strength in domestic demand growth supported by accommodative financial conditions amid diminished political risk and policy uncertainty.

Among the big four euro area members, growth was seen slowing next year in Germany, Italy and Spain, but accelerate in France.

The UK growth forecasts were downgraded from April, to 1.7 percent for this year and 1.5 percent for 2018. The projections were unchanged from July.

The medium-term growth outlook for the UK is highly uncertain and will depend in part on the new economic relationship with the EU and the extent of the increase in barriers to trade, migration, and cross-border financial activity, the IMF said.

Japan was forecast to grow 1.5 percent this year, but the pace was seen more than halving to 0.7 percent next year. Canada's growth was projected to slow from 3 percent this year to 2.1 percent in 2018.

In the emerging economies group, China's growth was projected to improve slightly to 6.8 percent this year and then ease to 6.5 percent next year.

India's expansion was seen slowing sharply to 6.7 percent this year from 7.1 percent in 2016. However, the pace of growth was forecast to improve to 7.4 percent next year.

by RTT Staff Writer

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