THE International Monetary Fund estimates that global economic output increased by 3.7 per cent in 2017 and forecasts the growth rate will rise to 3.9 per cent in 2018 and 2019, according to the IMF's latest quarterly World Economic Outlook (WEO) Update.If the IMF's forecast proves correct, last year's global economic output would be 0.5 percentage points higher than the 3.2 per cent growth rate recorded in 2016.
According to the IMF's WEO update, 120 economies that account for three quarters of world gross domestic product (GDP) saw their year-oyear growth rates improve in 2017, representing 'the broadest synchronised global growth upsurge since 2010'.
For this year and next, the fund has raised its projections 0.2 percentage points to 3.9 per cent as a reflection of increased global growth momentum and expected positive impacts from the tax policy changes in the United States.
'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 WEO update said.
'The effect on US growth is estimated to be positive through 2020, cumulating to 1.2 per cent through that year, with a range of uncertainty around this central scenario.'
Growth in advance economies is now expected to surpass two per cent in 2018 and 2019, according to the IMF, reflecting expectations that favourable global financial conditions and strong market confidence will help maintain the recent acceleration in demand, especially in investment, with a noticeable impact on growth in economies with large exports.
The fund warned, however, that short-term downside risks to their latest forecasts exist in the form of rich asset valuations and highly compressed term premiums, which could result in a financial market correction, thereby dampening market confidence and overall growth.
'If global sentiment remains strong and inflation muted, then financial conditions could remain loose into the medium term, leading to a buildup of financial vulnerabilities in advanced and emerging market economies alike,' the IMF said. 'Onward-looking policies, geopolitical tensions, and political uncertainty in some countries also pose downside risks.'