The latest update to the IMF World Economic Outlook sees a strengthening global growth environment, but noted that significant risk remains, Research Department Director Maury Obstfeld said ahead of the report’s release in Kuala Lumpur, Malaysia Monday (July 24).
“Our projections are broadly unchanged since April, but there have been some changes between country groups… some are up, some are down. The US and UK are a little bit down. But Europe is up, Japan is up, and emerging markets including China are up,” Obstfeld said.
Growth has been revised up for Japan and especially the euro area, where positive surprises to activity point to a pick-up in economic activity, the report notes.
But Obstfeld said that uncertainty surrounding fiscal stimulus spending and tax reform will slow US growth projections going forward.
India remains the fastest growing major world economy, while China has also seen a very slight uptick in its projected growth.
There are risks that could slow or derail growth, Obstfeld said.
“We view the risks as broadly balanced in the short term but somewhat to the downside over the longer run. It could be that Europe’s growth is higher than we expect given the receding of political risks there. It could also be that we see geo-political factors which lower growth or inward looking policies. Over the longer term we worry about China’s growth model and whether it is sustainable. And we also worry about stretched asset valuations,” said Obstfeld.
Global growth patterns remain below pre-2008 crisis levels, especially for advanced economies. Those countries must find ways of boosting productivity and of expanding inclusive growth, Obstfeld says.
“For advanced economies we still see inflation and wage growth that is extremely subdued. Policy support may be necessary, especially in countries with open output gaps. For emerging market’s structural reforms are necessary, as they are in advanced markets. Financial stability remains a priority and everywhere we have to think about inclusive growth and make that a priority,” said Obstfeld.
A full copy of the report may be found at IMF.org/WEO