International Monetary Fund lowers India's growth forecast over demonetisation, GST

International Monetary Fund

DNA Money Edit Unanimous in India's growth predictions

The IMF's forecast for the United Kingdom is the same as in its July report.

In its latest World Economic Outlook, the organisation said it still expects United Kingdom growth to drop to 1.7% in 2017 from 1.8% in 2016, and slow even further in 2018 to 1.5%.

Total world economic growth has been upgraded by 0.1% for both 2017 and 2018, to 3.6% and 3.7%, respectively, thanks to a "global cyclical upswing" that began past year.

It forecast a static gross domestic product (GDP) growth of 1.7% this year, slowing further to 1.5% in 2018.

The report also projects strengthening economic growth across most of Asia, raising its forecast for Japan but reducing it for India. The worldwide lending agency also notes that inflation remains worryingly low, a sign that the world economy still has not returned to full health in the aftermath of the Great Recession of 2007-2009.

Several countries have had their forecast upgraded - the largest changes this year are for Canada, Russia (partly because of stabilising oil prices) and Brazil, where the figures are still rather weak, but an improvement on the sharp contractions of the previous two years.

"This is particularly notable for economies where unemployment rates have declined relatively rapidly and are now close to or below pre-great recession averages", the International Monetary Fund said.

Finance ministers and central bankers from the IMF's 189 member nations will be heartened by the brighter global outlook as they meet this week in Washington for the fund's annual meetings. Investors have been basking for some time, with the MSCI world stock index up 15 percent this year. The specter of trade wars also remain, though they may be less of a danger than at recent global economic summits. The IMF's base case doesn't take into account fiscal stimulus from tax reforms backed by President Donald Trump and Republican leaders in Congress.

Even the outlook for advanced economies has been raised 0.2 percentage points higher than an earlier projection in July, to 2.2 percent, moving up the world's outlook from 3.5 percent to 3.6 percent.

"In the Euro area and Japan, stronger private consumption, investment and external demand bolstered overall growth momentum in the first half of the year".

Growth in Japan is being driven by global demand and policies created to keep fiscal policy supportive.

But lacklustre productivity growth and aging populations continue to drag on growth in the world's wealthiest countries.

"Strong government spending and data revisions in India led to an upward revision of 2016 growth to 7.1 per cent (6.8 per cent in April), with upward revisions of about 0.2 percentage point, on average, for 2014 and 2015", it said.

"Policy makers should act while the window of opportunity is open", according to Obstfeld.

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