International Monetary Fund raises Saudi growth prospects over high oil prices

International Monetary Fund raises Saudi growth prospects over high oil prices

International Monetary Fund raises Saudi growth prospects over high oil prices

The worldwide lending agency says 120 countries, representing three-quarters of world economic output, enjoyed economic growth in 2017, creating the broadest global expansion in seven years.

The worldwide lending agency said Monday it now projects Canada's economy will grow 2.3 per cent this year, up from an estimate of 2.1 per cent in October.

At the World Economic Forum meeting that is taking place in Davos, Switzerland, Christine Lagarde, IMF Managing Director claimed that this accelerated economic recovery should give all the leaders in the world a chance to fix their most pressing issues. That would be the strongest year for global growth since 2011 and represents an upward revision of 0.2 percent since the IMF's forecast in October.

However, the International Monetary Fund said that "in light of the increased fiscal deficit, which will require fiscal adjustment down the road, and the temporary nature of some provisions, growth is expected to be lower than in previous forecasts for a few years from 2022 onward, offsetting some of the earlier growth gains". This is very welcome news.

It noted that global economic activity has continued to firm up since mid-2016 and that output is estimated to have grown by 3.7 percent in 2017, which is 0.1 percent faster than projected in the fall and 0.5 percent higher than in 2016.

The IMF's latest report cited possible trade barriers and regulatory shake-ups as risks to growth as the United Kingdom seeks a new relationship with Europe after Brexit and the USA renegotiates its free trade treaty with neighbours Mexico and Canada. This growth percentage will make India among the fastest growing country among emerging economies. The region continues to account for over half of world growth.

Earlier in January, a top International Monetary Fund official said that India is reclaiming its place as global growth leader.

But the changes could also widen the US trade deficit, strengthen the dollar and affect worldwide investment flows, the IMF said, warning that the benefits of the tax package will be short-lived and that growth in the world's largest economy will slow from 2022 onwards. Some 120 economies, accounting for three-quarters of world GDP, have seen a pickup in growth in year-on-year terms in 2017, the broadest synchronised global growth upsurge since 2010, it said. At a time of widespread economic euphoria, with upward revisions of prospects for world economy and Europe in particular, Spain is only developed economy that has reduced its growth prospects. High-frequency hard data and sentiment indicators point to a continuation of strong momentum in the fourth quarter. "But we should also use this time to find lasting solutions to the challenges facing the global economy in 2018".

"The US tax policy changes are expected to stimulate activity, with the short-term impact in the United States mostly driven by the investment response to the corporate income tax cuts", the fund said.

The agency noted that risks to its global outlook were "broadly balanced" in the near term, but skewed to the downside in the medium term.

As major stock markets worldwide have been on the upswing, with repeated records set on Wall Street, the report warned that "rich asset valuations... raise the possibility of a financial market correction, which could dampen growth and confidence". Markets expect prices to gradually decline over the next 4-5 years. Among emerging market economies, headline and core inflation have ticked up slightly in recent months after declining earlier in 2017.

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