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- Fund lowers forecast for U.K. growth after soft first quarter
- Growth seen picking up in China, Japan, euro zone, Canada
The world is leaning less on its biggest economy to sustain the global recovery, according to the International Monetary Fund.
The fund left its forecast for global growth unchanged in the latest quarterly update to its World Economic Outlook, released Monday in Kuala Lumpur. The world economy will expand 3.5 percent this year, up from 3.2 percent in 2016, and by 3.6 percent next year, the IMF said. The forecasts for this year and next are unchanged from the fund’s projections in April.
Beneath the headline figures, though, the drivers of the recovery are shifting, with the world relying less than expected on the U.S. and U.K. and more on China, Japan, the euro zone and Canada, according to the Washington-based IMF.
The dollar fell to its lowest in 14 months last week as investors discounted the ability of President Donald Trump’s administration to deliver on its economic agenda after efforts by the Republican Senate to overhaul health care collapsed.
The IMF estimated U.S. growth at 2.1 percent this year and again in 2018, consistent with what the fund said June 27 in its annual assessment of the U.S. economy. In the April world economic outlook, it had forecast U.S. growth of 2.3 percent and 2.5 percent, respectively, in 2017 and 2018. The economy expanded by 1.6 percent in 2016.
“U.S. growth projections are lower than in April, primarily reflecting the assumption that fiscal policy will be less expansionary going forward than previously anticipated,” the IMF said in the latest report.
Other countries are picking up the slack. The IMF’s projection for growth in China is 6.7 percent for 2017 — the same as its estimate made June 14 in an annual staff report, and up 0.1 point from April’s world economic outlook. For 2018 the fund sees Chinese growth at 6.4 percent, an increase of 0.2 points from three months ago. In the staff report, the IMF looked for average annual growth of 6.4 percent in China during 2018 through 2020.
The IMF urged advanced countries with weak demand and low inflation to continue supporting growth through monetary and fiscal policy while cautioning central banks against raising borrowing costs too quickly. The fund said widespread protectionism or a “race to the bottom” on financial and regulatory oversight would leave all countries worse off.
Full article: IMF Sees U.S. Fading as Global Growth Engine (Bloomberg)