International Monetary Fund cuts South Africa's growth forecast for next two years

Jan 23, 2018, 01:34
International Monetary Fund cuts South Africa's growth forecast for next two years

The update for Canada came as the International Monetary Fund said world output is expected to grow 3.9 per cent this year and 3.9 per cent in 2019, up two-tenths of a percentage point in both years.

But the changes could also widen the US trade deficit, strengthen the dollar and affect global investment flows, the IMF said, warning that the benefits of the tax package will be short-lived and that growth in the world's largest economy will slow from 2022 onwards.

The Tax Cuts and Jobs Act, which was signed into law by President Donald Trump in December, is projected to push GDP growth higher than previously expected.

A stronger USA economy will also boost the economies of America's trading partners, especially Mexico and Canada.

It said the growth pickup "has been broad based, with notable upside surprises in Europe and Asia".

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India is projected to grow at 7.4% of its gross domestic product (GDP) in 2018 as against China's 6.8%, the International Monetary Fund (IMF) said Monday, making it the fastest growing economy among emerging economies following last year's slowdown due to demonetisation and the implementation of goods and services tax (GST). Russian Federation is among primary sources of global GDP acceleration along with the United States, Canada, Brazil and Turkey, IMF Economic Counsellor Maurice Obstfeld said on Monday. Next year, growth is seen edging up to 2.5% versus 1.9% predicted in October.

The Office for National Statistics will reveal its preliminary estimate for growth in the final quarter of 2017, and also the full calendar year, on Friday.

The IMF maintains its growth prediction for the United Kingdom in 2018 at 1.5% but cuts its forecast for 2019 by one tenth of a percentage point, to 1.5% as well.

The agency noted that risks to its global outlook were "broadly balanced" in the near term, but skewed to the downside in the medium term.

On the downside, rich asset valuations and very compressed term premiums raise the possibility of a financial market correction, which could dampen growth and confidence.

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The current she stressed remains cyclical and this is the reason why proactive measures must be taken in driving the economies.

The International Monetary Fund says US tax reform and its associated fiscal stimulus will give a temporary boost to the USA economy, which will have a spillover effect for Canada and Mexico.

But the Fund also said Italy's March general election posed a risk to structural reforms.

An improving global growth outlook, weather events in the USA, the extension of the Opec+ agreement to limit oil production, and geopolitical tensions in the Middle East have supported crude oil prices. Among emerging market economies, headline and core inflation have ticked up slightly in recent months after declining earlier in 2017.

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