Ahead of Davos, IMF predicts positive growth for India, world

Jeannie Matthews
January 22, 2018

The International Monetary Fund on Monday revised up its forecast for world economic growth in 2018 and 2019, saying sweeping USA tax cuts were likely to boost investment in the world's largest economy and help its main trading partners.

In the latest update to the IMF's World Economic Outlook, almost all the forecasts for 2018 and 2019 were revised upward compared to the October edition.

The WEO upgraded the US GDP forecast by a surprising four-tenths of a point this year to 2.7 percent, compared to the expected 2.3 percent in 2017. The Washington-based lender also revised its forecast for global economic expansion in 2018 and 2019 to 3.9%, both 0.2 percentage points higher than the October projections and stronger than its estimate of a revised 3.7% expansion rate for 2017.

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The International Monetary Fund (IMF) marginally raised its estimates for China's economic growth in 2018 and 2019 on the back of stronger demand for exports as the world economy picks up speed. "Secondly, growth needs to be more inclusive, not just across countries but within countries". "The recent US tax legislation will contribute noticeably to USA growth over the next few years, largely because of the temporary exceptional investment incentives that it offers".

In the year gone by, China (6.8 per cent) was ahead of India (6.7 per cent), giving China the tag of being the fastest growing emerging economies, as has been the case for major parts of the past several decades.

Spain, with the hit from the independence movement in Catalonia, was a rare exception, seeing a one-tenth downgrade in the 2018 forecast to 2.4 percent.

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Lagarde, also a co-chair for this year's annual meeting, said global growth has been accelerating since 2016, and all signs point to a continuing strengthening of this growth.

Notably, with a growth rate of 7.1 per cent, India was the fastest growing country among emerging economies in the year 2016.

"With the world economy now being the most integrated it has been in its history, it's not surprising that people are starting to worry about the pendulum swinging in the other direction", said Philipp Hildebrand, vice chairman at investment firm BlackRock Inc.

The agency noted that risks to its global outlook were "broadly balanced" in the near term, but skewed to the downside in the medium term.

As major stock markets worldwide have been on the upswing, with repeated records set on Wall Street, the report warned that "rich asset valuations... raise the possibility of a financial market correction, which could dampen growth and confidence".

Shadow Chancellor John McDonnell said: "The IMF report out today confirms what others have been saying - the United Kingdom economy is not growing as fast as many other advanced economies". "Firstly, policy makers should use these circumstances to make the structural or fiscal reforms that are too hard to make in more difficult times", she said.

Global economy has been accelerating, but its current recovery is cyclical, International Monetary Fund head Christine Lagarde said.

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