The beginning of the year may turn out to be very successful for the global economy – the International Monetary Fund (IMF) predicts acceleration of growth in several large countries at once. The largest increase is projected in the United States, where tax reform will increase investment.
In addition, oil-exporting countries will benefit significantly from the continued increase in oil prices.
However, this situation may not last long – as the effects of cyclical improvement are exhausted, countries will again face restrictions such as low productivity growth and an aging population, the IMF warns.
The IMF raised its forecast for global economic growth in 2018 and 2019 by 0.2 percentage points, to 3.9% (in 2017 this figure was 3.7%, in 2016 – 3.2%).
The fund indicates that the recovery in growth is cyclical: an increase in business activity occurs against the backdrop of soft financial conditions.
At the same time, world trade, which lagged behind GDP growth rates for a long time, is growing faster than output again due to increased investments – the forecast for total export growth for two years has been increased by more than 0.5 pp to 4.6% and 4 4% respectively.
Accelerated growth is promoted mainly by developed countries. The fund improved its forecast for US economic growth in 2018 and 2019 by 0.4 and 0.6 percentage points (to 2.7% and 2.5%, respectively), for the euro area – by 0.3 percentage points. for both years (up to 2.2% and 2%).
Unlike the World Bank, the IMF expects U.S. tax reform to help grow because sharp cuts in rates will allow corporations to increase investment (however, imports and trade deficits will increase, which will benefit trading partners from this country).
The cumulative positive effect of the US reform by 2020 is estimated at 1.2% of GDP in the fund, but they indicate: from 2022, the package of measures will have a negative impact on the growth rate due to the time-limited number of benefits and due to increase in public debt.
Among developing countries, the largest upward adjustment of forecasts (by 0.4–0.6 percentage points) affected Saudi Arabia (up to 1.6% and 2.2% in 2017 and 2018), as well as Mexico ( up to 2.3% and 3%) and Brazil (up to 1.9% and 2.1%). In China, the forecast improved by 0.1 pp for both years, however, in 2018 and 2019, the growth rate will be lower than last year (6.6% and 6.45% versus 6.8%) . In Russia, the forecast is improved only for 2018 – also by 0.1 percentage points, to 1.7%.
At the same time, already in 2019, the growth rate will slow down again – up to 1.5%, the IMF forecast. Note that the fund improved the forecast for oil prices, raising it for this year by $ 9.7, to $ 59.9 per barrel, for 2019 – to $ 56.4 per barrel.
An almost universal improvement in the situation cannot be considered a reason to increase long-term growth rates – the next decline in activity will come faster and will be harder to deal with, IMF chief economist Mori Obstfeld warned when he presented the fund's report in Swiss Davos on Monday.
Past problems — low productivity growth and an aging population — limit growth opportunities.
The fund calls on countries for structural and fiscal reforms – to reduce the level of debt burden while supporting investment in infrastructure.
Among the risks, the IMF also names a possible correction of financial markets due to already high quotes and tight premiums for the term (raising funds for a longer period costs companies only slightly more expensive).
Even if a sharp increase in inflation does not occur, maintaining low rates will make the financial system more vulnerable to shocks, the fund warned.