Wednesday 18 October 2017

IMF upgrades Ireland's growth forecast for this year and 2018

The IMF, under boss Christine Lagarde, has upgraded global growth projections
The IMF, under boss Christine Lagarde, has upgraded global growth projections
Colm Kelpie

Colm Kelpie

The International Monetary Fund has upgraded Ireland's growth forecast for this year and next, helped by a "benign" global financial environment and a recovery in advanced economies.

It also upgraded global growth projections, although it downgraded its projection for both the UK for this year, and US for both 2017 and 2018. The Washington DC-based body urged against being lulled into complacency, warning that a closer look suggests the global recovery may not be sustainable.

In its latest assessment, the International Monetary Fund (IMF) forecast the Irish economy would grow by 4.1pc this year and 3.4pc next year. That's up from 3.5pc and 3.2pc respectively in the IMF's previous outlook, in April.

In contrast, compared with that forecast, growth has been marked down for 2017 in the UK and for both 2017 and 2018 in the US.

"Activity in the UK slowed more than anticipated in the first half of 2017. As for the US, given the significant policy uncertainty, the forecast now uses a baseline assumption of unchanged policies, whereas in April it assumed a fiscal stimulus driven by then-anticipated tax cuts," the report states.

The UK economy is projected to increase by 1.7pc this year and 1.5pc next year. The US will grow by 2.2pc this year, and 2.3pc in 2018. The IMF made little specific mention of Brexit, other than to say its forecast assumes that the negotiations will go ahead "without raising excessive uncertainty, and the arrangements are expected to eventually settle in a manner that avoids a very large increase in economic barriers".

The IMF's latest World Economic Outlook started off on a positive note, stating that only 18 months ago the world economy faced stalling growth and turbulence in the financial market.

"The picture now is very different, with accelerating growth in Europe, Japan, China, and the US," the report states.

"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."

But it added that, while the positive developments give rise for greater confidence, neither policymakers nor markets should be "lulled into complacency".

"A closer look suggests that the global recovery may not be sustainable - not all countries are participating, inflation often remains below target with weak wage growth, and the medium-term outlook still disappoints in many parts of the world. The recovery is also vulnerable to serious risks."

The IMF, headed up by Christine Lagarde, upgraded global growth projections to 3.6pc for this year and 3.7pc for next year - in both cases 0.1 percentage point above its previous forecasts, and well above last year's global growth rate of 3.2pc, which was the lowest since the global financial crisis.

Maurice Obstfeld, the IMF's chief economist, said for this year, most of the upgrade is down to brighter prospects for advanced economies, whereas for 2018, emerging markets and developing economies play a bigger role.

But he added: "Policymakers should seize the moment: the recovery is still incomplete in important respects, and the window for action the current cyclical upswing offers will not be open forever."

Irish Independent

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