IMF maintains its world growth forecasts for 2018 and 2019

25 Jul 2018

Tags

  • Edmund Tang
  • IMF

Releasing its latest World Economic Outlook (WEO) report on 16 July, the International Monetary Fund (IMF) left unchanged its world economic growth forecasts at 3.9% for both 2018 and 2019, compared to its April 2018 projections.

Although global growth was expected to remain strong, the IMF’s WEO report says ‘the expansion is becoming less even, and risks to the outlook are mounting’. It also stresses that ‘The balance of risks has shifted further to the downside, including in the short term.’

Despite the rising concerns about global trade tensions, the IMF maintained its growth forecasts for the US and China in 2018 and 2019. In the US, the IMF projected economic growth of 2.9% this year and 2.7% next year, anticipating an expansion from recent tax cuts and increased government spending.

The WEO report notes ‘China continues to grow in line with our earlier projections’ with growth easing from 6.9% in 2017 to 6.6% in 2018 and 6.4% in 2019, as regulatory tightening of the financial sector took hold and external demand softened.

However, the IMF cut its 2018 growth forecasts for Euro Area countries and for Japan and the UK, due to a softer-than-expected first-quarter performance, coupled with tighter financial conditions partly due to political uncertainty. The Euro Area’s 2018 growth rate was trimmed to 2.2% from 2.4%, with the UK cut to 1.4% from 1.6%. Japan’s growth projection was cut to 1.0% from 1.2%.

Germany, France and Italy received significant growth downgrades from the IMF’s April forecasts (up to 0.3%), amid rising political challenges regarding migration policy and fiscal governance.

The IMF also cut India's growth rates by 0.1% and 0.3% to 7.3% and 7.5% in 2018 and 2019 respectively because of the negative effects of higher oil prices on domestic demand and faster-than-anticipated monetary policy tightening due to higher inflation.

Average real GDP growth rate in the ASEAN-5 was anticipated to stabilise at around 5.3% as domestic demand was anticipated to stay healthy and exports continued to recover.

IMF’s world economic outlook projections