The International Monetary Fund has released its forecast for the world economy in the next two years
The IMF has upgraded its forecasts regarding the world economy in 2017 and 2018, according to its World Economic Outlook report made public on Tuesday, ahead of its spring meeting. The IMF expects a global economic growth rate of 3.5% this year and 3.6% in 2018, as against 3.1% in 2016. Acceleration will be largely felt both in the developed and in the emerging economies, based on investment, manufacturing and trade. The positive outlook is prompted in part by an accelerated growth rate and is owing to the progress reported in Europe, Japan, China and the US. Moreover, many banks, including in Europe and developing countries, have restored their capital and thus gained further elasticity.
There are, however, risks as well, the IMF warns. The institution's chief economist Maurice Obstfeld says the major risks come from the world's two leading economies, the USA and China. He explained that the Federal Reserve's policy to give up the zero interest rate and the new administration's announcement regarding an extensive investment policy may deepen inflation risks, leading to an appreciation of the US dollar and thus creating difficulties for the emerging countries with dollar-denominated bonds. As regards China, the risks are related to Beijing's trade rebalancing process and to its plans to boost the services sector at the expense of the industrial output. Adding to this is a substantial growth in domestic credit, which may cause financial stability problems and spill over to other economies as well, the IMF official explained, and added that protectionist policies jeopardise the recovery process.
According to the IMF report, Europe will see a 2% economic growth rate, with 3% growth in emerging Europe, Romania included. The Fund has upgraded its growth forecast for Romania, from 3.8 to 4.2% in 2017, and from 3.3 to 3.4% in 2018. The IMF expects Romania to have the second-highest growth rate in Europe this year, only outpaced by Iceland (5.7%). The main engine of growth is consumption, as a result of the cuts in taxes, salary increases, and lower interest rates for both the domestic currency and the euro. The IMF also expects the country's unemployment rate to fall significantly this year, to 5.4%, as opposed to the 6.2% in its previous forecast, and to 5.2% in 2018. On the other hand, the Fund also revised its inflation estimates, from negative 1.6% last year to 1.3% in 2017 and over 3% next year. The Fund's main concerns, as far as the Romanian economy goes, have to do with the sustainability of public finances in the context of the recent salary increases.