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IMF raises global growth forecast, sees US tax boost
Context:
- The International Monetary Fund revised up its forecast for world economic growth in 2018 and 2019.
What are the findings of the report?
- United States and China: Pointing to growth in the United States and China, the IMF forecast global growth to accelerate to 3.9% for both 2018 and 2019, a 0.2 percentage point increase from its last update in October.
- Spain: The IMF cut its forecast for Spain’s growth for 2018 by 0.1 percentage point.
- Japan: The IMF revised up its growth forecast for Japan to 1.2% this year and 0.9% in 2019.
- Britain: It maintained its projection for Britain’s growth at 1.5% this year.
- Middle East, North Africa, Afghanistan and Pakistan: It said growth in the Middle East, North Africa, Afghanistan and Pakistan was also expected to pick up in 2018 and 2019 but remain subdued at 3.6% this year.
- South Africa: The IMF revised down its growth estimate for South Africa to 0.9% for this year and next amid concerns over political uncertainty.
- Latin America: In Latin America, it said growth would be weighed down by an economic collapse in Venezuela despite a pick-up in economic activity in Brazil and Mexico.
What are the major takeaways from the report?
- Firstly, sweeping U.S. tax cuts were likely to boost investment in the world’s largest economy and help its main trading partners.
- Secondly, U.S. growth would likely start weakening after 2022 as temporary spending incentives brought about by the tax cuts began to expire.
- Thirdly, Political leaders and policymakers must be aware that the current economic momentum reflects a confluence of factors that is unlikely to last for long.
- Fourthly, there is a troubling increase in debt levels across many countries and warned policymakers against complacency.
- Fifthly, a sudden rise in interest rates could lead to questions about the debt sustainability of some countries and lead to a disruptive correction in “elevated” equity prices.
