Global growth less even, downside risks mounting
Global economic growth remains on track to hit 3.9 percent this year and the next, the International Monetary Fund (IMF) said on Monday, but the expansion has become “less even” and risks to the outlook are on the rise.
“As the global cyclical upswing approaches its two-year mark, the pace of expansion in some economies appears to have peaked and growth has become less synchronized across countries,” the Washington-based multilateral lender said in a July update of its 2018 World Economic Outlook (WEO).
“While the baseline forecast for global growth is roughly unchanged, the balance of risks has shifted to the downside in the near term and, as in the April 2018 WEO, remains skewed to the downside in the medium term,” it added.
The 2018 forecast for advanced economies was trimmed by 0.1 percentage points to 2.4 percent for 2018 – “largely reflecting greater-than expected growth moderations in the euro area and Japan” — while that for 2019 was kept at 2.2 percent.
Emerging and developing economies, meanwhile, are still expected to hit 4.9 percent and 5.1 percent growth this year and the next, respectively, with the 2018 forecast for the top Association of Southeast Asian Nations economies (Asean-5) kept at 5.3 percent.
“Growth in the Asean-5 group of economies is expected to stabilize at around 5.3 percent as domestic demand remains healthy and exports continue to recover,” the IMF said.
Country data was not provided but in the April WEO, the Philippines — one of the Asean-5 along with Indonesia, Thailand, Malaysia and Vietnam — was forecast to grow by 6.7 percent and 6.8 percent in 2018 and 2019, respectively, from 6.7 percent in 2017.
The IMF tagged brewing trade disputes sparked by the United States as threatening the global recovery and overall financial conditions that could also be upended by geopolitical concerns and political uncertainties.
“Tighter financial conditions could potentially cause disruptive portfolio adjustments, sharp exchange rate movements and further reductions in capital inflows to emerging markets, particularly those with weaker fundamentals or higher political risks,” it said.
It urged policymakers to avoid protectionist measures and work on cooperative solutions that would bolster the trade growth essential to sustain the global economy.
“Policies and reforms should aim at sustaining activity, raising medium-term growth and enhancing its inclusiveness,” the IMF said.
“But with reduced slack and downside risks mounting, many countries need to rebuild fiscal buffers to create policy space for the next downturn and strengthen fiscal resilience to an environment of possible higher market volatility.
FROM A REPORT BY ED VELASCO
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