International Monetary Fund raises outlook for Canadian economy, upgrades global economic projections

Posted January 23, 2018

The IMF released an update of its World Economic Outlook on Tuesday.

"The revision reflects increased global growth momentum and the expected impact of the recently approved US tax policy changes", the Fund states in its latest World Economic Outlook update, referencing the corporation tax cuts pushed through the US Congress late past year. In a survey conducted by consulting firm PricewaterhouseCoopers, chief executives said that excluding their home market they are most likely to invest in the USA, followed by China with the world's largest economy expanding its gap as corporate chiefs expect more rapid growth in America.

The global economy is now expected to grow 3.9 percent this year and next, two-tenths higher than the previous estimate, and up from 3.7 percent in 2017. This growth percentage will make India among the fastest growing country among emerging economies.

Ironically, the stronger growth could provide the seeds of a possible reversal if it triggers faster-than-expected inflation in advanced economies, and a quicker increase in interest rates. The recent United States tax legislation will contribute noticeably to United States growth over the next few years, largely because of the temporary exceptional investment incentives that it offers, he said.

"The global financial crisis may seem firmly behind us, but without prompt action to address structural growth impediments, enhance the inclusiveness of growth, and build policy buffers and resilience, the next downturn will come sooner and be harder to fight", Obstfeld said.

The fund has taken advantage of outstanding participation of its Managing director, Christine Lagarde, in this year's Davos Forum edition to announce its new growth forecasts at Alpine station. and join m in message of optimism that pervades this edition of World Economic Forum (WEF) on all fronts. "The effects of the package on output in the United States and its trading partners contribute about half of the cumulative revision to global growth over 2018-19".

The IMF said the short-term impact in the U.S. will mostly be driven by the investment response to the corporate income tax cuts.

Corruption allegations under the leadership of President Jacob Zuma have hurt investor confidence in South Africa, with economic growth slowing to a near-standstill in recent years.

However, the rosier outlook came with a major caveat on financial markets, which the International Monetary Fund warned could be at the risk of a confidence-shaking correction.

And the absence of worries in the near term could prompt financial market players to look for riskier and more profitable investments "and amplify the buildup of financial vulnerabilities", the International Monetary Fund warned.

The cyclical upswing underway since mid-2016 has continued to strengthen. "Multilateral cooperation remains vital for securing the global recovery", it said.