IMF: World Economy Expands Next Two Years; Growth Softens After 2020

20 Apr 2018


  • Edmund Tang
  • IMF
  • International Economy

The International Monetary Fund (IMF) said in April that it expects global growth will inch up from 3.8 per cent in 2017 to 3.9 per cent in 2018 and 2019  – up by 0.2 percentage points from the predicted growth rates for each year in the October 2017 World Economic Outlook (WEO). The latest projected figures are based on the assumptions of “strong momentum, favourable market sentiment, accommodative financial conditions, and the domestic and international repercussions of expansionary fiscal policy in the United States”[1]. In the meantime, “the partial recovery in commodity prices should allow conditions in commodity exporters to gradually improve.”

In addition, the IMF’s predicted growth outcomes in 2018 and 2019 would be the strongest since 2010-11, when there was an initial sharp bounce back from the global recession of 2008-09. The IMF said in its latest WEO that global growth is projected to soften beyond the next couple of years. However, the IMF listed several factors that could drag on growth, including “a possibly sharp tightening of financial conditions, waning popular support for global economic integration, growing trade tensions and risks of a shift toward protectionist policies, and geopolitical strains.”[2]

  • The WEO said its biggest growth upgrade since October had been for the US, which is expected to expand by 2.9 per cent in 2018 and 2.7 per cent in 2019 – up from the 2.3 per cent and 1.9 per cent forecast in October last year. The Eurozone is also anticipated to outperform previous forecasts, with growth of 2.4 per cent in 2018 and 2.0 per cent in 2019, up by 0.5 and 0.3 percentage points, respectively.
  • In the UK, real GDP growth is likely to slow from 1.8 per cent in 2017 to 1.6 per cent in 2018 and 1.5 per cent in 2019, with business investment anticipated to remain weak in light of heightened uncertainty about post-Brexit arrangements. The medium-term growth projection is also broadly unchanged at 1.6 per cent, reflecting the IMF’s anticipation of higher barriers to trade and lower foreign direct investment following Brexit.
  • The IMF forecasts that the world's second-largest economy, China, will probably expand at a 6.6 per cent rate this year and 6.4 per cent in 2019, virtually unchanged from the previous Outlook predictions. The Fund says China will continue changing its economic focus from investment and manufacturing toward private consumption and services, but warns that a rising nonfinancial debt clouds the nation's medium-term outlook.
  • Annual growth rates in India are expected to remain strong, with real output growing by 7.4 per cent in 2018 and 7.8 per cent in 2019. The forecast is unchanged from the October WEO, with the short-term firming of growth driven by a recovery from the transitory effects of the currency exchange initiative and implementation of the national goods and services tax, as well as sustained by strong private consumption growth.[3]
  • Among the ASEAN-5 major economies (Indonesia, Malaysia, Philippines, Thailand, Vietnam), broadly stable growth is estimated for the group, at 5.3 per cent in 2018 and 5.4 per cent in 2019.[4]
  • The Fund has upgraded its forecasts for economic growth in Australia to three per cent this year, a sharp rise from 2.3 per cent in 2017, and up from the 2.9 per cent rate predicted earlier this year. The projected figures are in line with the federal government’s May 2018 budget update with GDP forecast to grow by 2.8 per cent in 2017-18 and three per cent in 2018-19 after growth of around two per cent in 2016-17. And next year Australia’s GDP will rise again to 3.1 per cent, according to the IMF’s latest report. Australia's growth rate in 2019 – the highest growth rate since 2012 - is one of the highest among the advanced economies.*

IMF world economic outlook: Summary of world output

[1]  IMF WEO April 2018: Cyclic al Upswing, Structural Change, page 1
[2]  Ibid, Executive Summary, page xvi
[3]  Ibid, Chapter 1 Global Prospects and Policies, Page 17
[4]  Ibid, Table A4. Emerging Market and Developing Economies: Real GDP, page 244

[4]  Ibid, Table A4. Emerging Market and Developing Economies: Real GDP, page 244

*This article was updated on on 14 May 2018 to reference the May 2018 Budget.