The International Monetary Fund (IMF) has raised growth forecasts for all advanced economies aside from the UK, after weaker-than-expected economic performance resulted in a downgrade earlier this year amid Brexit uncertainty.
In its latest World Economic Outlook, the organisation said it still expects UK growth to drop to 1.7% in 2017 from 1.8% in 2016, and slow even further in 2018 to 1.5%.
The UK was the only major economy that failed to see growth revised higher by the IMF, which cut its 2017 outlook from 2% back in July.
The IMF said the slowdown in growth was driven by a drop in household spending amid the pound’s post-Brexit collapse, which has sent inflation up 2.9%.
“The medium-term growth outlook is highly uncertain and will depend in part on the new economic relationship with the EU and the extent of the increase in barriers to trade, migration, and cross-border financial activity,” the report explained.
The United States also suffered a cut to growth projections this summer, but received an upgrade in the October report that nullified the move. The US economy is now expected to grow 2.2% this year and 2.3% in 2018.
“In the United States, weakness in consumption in the first quarter turned out to be temporary, while business investment continued to strengthen, partly reflecting a recovery in the energy sector,” the IMF said.
Others including the euro area and Japan benefited from stronger household spending, investment and external demand, which together “bolstered overall growth momentum” in the first half of the year.
“Growth in most of the other advanced economies, with the notable exception of the United Kingdom, picked up in the first half of 2017 from its pace in the second half of 2016, with both domestic and external demand contributing,” the IMF said.
With UK growth projected at 1.7% this year, it will only surpass a handful of its peers, with Italy expected to grow 1.5%, France 1.6% and Japan 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 last year.
“Only a year-and-a-half ago, the world economy faced stalling growth and financial market turbulence. The picture now is very different,” the IMF said.
“Financial conditions remain buoyant across the world, and financial markets seem to be expecting little turbulence going forward, even as the Federal Reserve continues its monetary normalisation process and the European Central Bank inches up to its own.”
The Washington DC-based organisation said that while these developments give “good cause” for higher confidence, “neither policymakers nor markets should be lulled into complacency”.
It warned that policymakers had to think long-term and implement fiscal and structural reforms to ensure that the global recovery would hold.
“The possibility that they don’t – governments far too often wait for crises to push them into decisive action – is itself a source of risks to the outlook, as well as a barrier to more inclusive and sustainable growth,” the IMF explained.
“Recent economic progress provides a global environment of opportunity, and policymakers should not let their chance go to waste.”
Recommended for you
Read the latest opinion pieces from our Energy Voice columnists
- So, you think that you know all there is to know about Christmas?
- Opinion: Economic reality is set to box Mario Draghi into a corner
- Opinion: The perfect time to show some spirit for the North Sea
- Opinion: Invest, innovate, initiate in 2018
- Opinion: The Arctic threat to Saudi Arabia’s grand oil bargain