11 January 2018: The latest World Economic Update by the International Monetary Fund (IMF) finds that global economic activity continues to strengthen, with global output estimated to have grown by 3.7% in 2017, or 0.1% faster than projected. The World Bank published its report on ‘Global Economic Prospects,’ showing an upswing that could contribute to ending extreme poverty.

The IMF’s Update, released on 11 January 2018, presents “notable upside surprises” in Europe and Asia, and revises global growth forecasts for 2018 and 2019 upward by 0.2%, to 3.9%, reflecting both the global growth momentum and the expected impact of the recently approved US tax policy changes.

For Euro area countries, the report shows that growth rates for many economies have been revised upward, especially for Germany, Italy and the Netherlands, reflecting the stronger momentum in domestic demand and higher external demand. Growth in Spain, the authors note, has been revised downward slightly for 2018 to reflect the effects of increased political uncertainty on confidence and demand.

The growth forecast for 2018 and 2019 reflects also stronger growth in advanced Asian economies, including the growth forecast for Japan being revised up. Emerging and developing Asia will grow at around 6.5% over 2018-19, the Update says, highlighting that the region continues to account for over half of world growth: growth is expected to moderate gradually in China, pick up in India, and remain broadly stable in the ASEAN-5 region. There is a slight upward revision to growth prospects for Russia in 2018 as well.

In Latin America, the publication notes, the recovery is expected to strengthen, with growth of 1.9% in 2018 and 2.6% in 2019, a 0.2% upward revision. This change primarily reflects, the authors explain: an improved outlook for Mexico, benefiting from stronger US demand; a firmer recovery in Brazil; and favorable effects of stronger commodity prices and easier financing conditions on some commodity-exporting countries.

The Update forecasts that growth in the Middle East, North Africa, Afghanistan, and the Pakistan region will pick up in 2018 and 2019, but remains at around 3.5%. While stronger oil prices are helping a recovery in domestic demand in oil exporters, the need for fiscal adjustment weighs down growth prospects. The growth pickup in Sub-Saharan Africa, the text notes, is broad: from 2.7% in 2017 to 3.3% in 2018 and 3.5% in 2019, with a modest upgrade to the growth forecast for Nigeria. In South Africa, however, growth is expected to remain below 1% in 2018-2019 because of increased political uncertainty.

The Update explains that in the near term, risks to the global growth forecast appear broadly balanced, but are skewed to the downside over the medium term. Developments that could pose downside risks include: inward-looking policies; geopolitical tensions; political uncertainty in some countries; and extreme weather developments with impact on humanitarian costs, economic losses and migration.

In its Economic Outlook published on 28 November 2017, the Organisation for Economic Co-operation and Development (OECD) noted that household and corporate debt in many advanced and emerging market economies is high, creating vulnerabilities and raising questions about the sustainability of growth in the medium term.

The IMF World Economic Update mentions that the current cyclical upswing provides an ideal opportunity for reforms, adding that shared priorities across all economies should include implementing structural reforms to boost potential output and making growth more inclusive. The authors further recommend fiscal policy to be increasingly designed with an eye on medium-term goals, to ensure fiscal sustainability. The publication highlights that multilateral cooperation “remains vital” for securing the global recovery.

Speaking on World Bank’s ‘Global Economic Prospects,’ published on 9 January 2018, World Bank President Jim Yong Kim noted that the current cyclical upswing is a great opportunity to invest in human and physical capital so that governments increase their countries’ productivity, boost workforce participation, and move closer to the goal of ending extreme poverty. Shantayanan Devarajan, World Bank, further stressed that reforms that promote quality education and health, as well as improve infrastructure services could substantially bolster potential growth, especially among emerging market and developing economies. [IMF World Economic Outlook January 2018] [World Bank Press Release] [World Bank Global Economic Prospects] [OECD Press Release]