The IMF has adopted a more Bullish approach to its view on the fortunes of the global economy. Understandably, however, the upturn is likely to be patchy. Its current forecasts predict that the global economy will grow by 3.6% this year and by 3.7% next year.
On the gloomier side, the IMF is expecting that UK growth will have a lower trajectory than it previously estimated, trimming this year’s growth to 1.7% this year (down from 1.8% in 2016) and 1.5% next year, with the UK bucking the global trend for accelerating growth. The UK can still bask in the schadenfreude that it is not (yet) the slowest growing economy in the G7; that honour is bestowed on Japan and Italy.
According to the IMF, the UK economy will suffer from weaker consumer demand as a result of inflationary pressure feeding through from the relative weakness of Sterling since the June 2016 referendum outcome. The price of imports of both finished goods and raw materials are hurt by the weak Pound since they are usually set in US Dollars. On the positive side, the IMF report is expecting UK inflation to slowly fall back to the 2% level corresponding to the Bank of England target. Unsurprisingly, the report says the economic outcome for the UK is highly uncertain and dependent on the emerging trading relationship with it biggest export partner, the EU. Any increase in the barriers to trade, migration of workers and EU-UK financial services will have a negative impact on the UK’s economic growth. Clearly, the IMF does not subscribe to the idiotic “no deal is better than a bad deal” mantra that the ruling Tory party insists on.
Internationally, the fortunes of Canada and Russia are improved by a stabilising oil price, Brazil is expected to recover from two years of contraction and India is anticipated to grow by more than 7%. Political instability is weighing on the economic fortunes of South Africa at the moment.