In April 2018, the International Monetary Fund (IMF) released its World Economic Outlook.
The highlights of the economy are as follows.
* The growth in global investment and trade continued in the second half of 2017. At 3.8 per cent, global growth in 2017 was the fastest since 2011. With financial conditions still supportive, global growth is likely to increase to 3.9 per cent rate in both 2018 and 2019.
* Developed economies will grow faster than potential in 2018 and 2019 and next. European countries are set to narrow excess capacity with support from accommodative monetary policy and expansionary fiscal policy will lead the US economy above full employment. Growth in emerging market and developing economies will rise before levelling off.
* Total growth in emerging market and emerging economies is projected to firm further, with continued strong growth in emerging Asia and Europe and a modest growth in commodity exporters after three years of weak performance.
* Some cyclical forces will wane; financial conditions are likely to tighten naturally with the closing of output gaps and monetary policy normalisation; US tax reform will lessen momentum starting in 2020 and then more strongly as full investment expensing is phased out starting in 2023; China’s transition to lower growth is expected to resume as credit growth and fiscal stimulus diminish.
Reforms and policies suggested are as follows are:
* All countries have room for structural reforms and fiscal policies that increase productivity and enhance inclusiveness, for instance by encouraging experimentation and diffusion of new technologies, increasing labour force participation, supporting those displaced by structural change and investing in the young to increase their job opportunities.
* Recovery should be completed and buffers built. Monetary accommodation requires to continue where inflation is weak, but a well-communicated, data-dependent normalisation should follow in countries where inflation looks set to return to the central bank’s target. Fiscal policies should start rebuilding buffers where needed, incorporate supply-side measures to support potential output and promote inclusiveness.
* Financial resilience must be improved. Macro and microprudential policies can limit rising leverage and contain financial market risks. In some advanced economies, balance sheet repair needs to continue. Emerging market economies should keep monitoring exposures to foreign currency debt. Building on recent efforts, China should continue to rein in credit growth and address financial risks.
* Convergence prospects for low-income developing countries need to be improved. Regular progress towards the 2030 United Nations Sustainable Development Goals will require low-income developing countries to execute policies that strengthen their fiscal positions, enhance financial resilience, reduce poverty and make growth more inclusive.