IMF improves forecasts for world growth in 2018 and 2019 to 3.9%
The IMF maintains its growth prediction for the UK in 2018 at 1.5% but cuts its forecast for 2019 by one tenth of a percentage point, to 1.5% as well.
According to the IMF’s January World Economic Outlook projections, the global economy grew by 3.7% in 2017 (0.1% faster than estimated in autumn) and was predicted that to grow by another 3.9% in 2018 and 2019 each.
Comparing the January report to the last outlook, released back in October 2017, the new edition took into account the increased global growth momentum and the expected impact of the recently approved U.S. tax policy changes.
However, in its own forecasts released on Monday as well, Capital Economics claimed the IMF was being overly-optimistic with its predictions.
Analysts at Capital said, "We agree with the IMF, and almost all other forecasters, that the immediate outlook is fairly bright," but noted the current "sweet spot” may not last quite as long as the IMF seems to expect.
"Instead, we think the world economy will lose some momentum later this year and in 2019. This is partly because we estimate that potential global growth is now slightly below 3%, whereas actual growth in 2017 and 2018 will average 3.5%."
Although the IMF's predictions appeared to be good news for the global economy as a whole, the Fund reiterated its prediction of 1.5% GDP growth for the UK in 2018 while trimming its prediction for 2019 by a tenth of a percentage point to 1.5%.
At first glance, that was but a small change, but it was more notable when compared with the growth predicted for other large advanced economies.
For example, Germany was expected to grow by 2.3% in 2018 and by 2% in 2019.
"The Bank of England raised its policy rate for the first time since 2008 in view of diminishing slack in the economy and to target inflation driven by the past sterling depreciation," the Washington-based lender said in its report.
The Fund's economists also explained that as commercial agreements between the EU and the UK were under renegotiation due to Brexit, that might negatively impact the country’s rate of economic growth.
"An increase in trade barriers and regulatory realignments, in the context of these negotiations or elsewhere, would weigh on global investment and reduce production efficiency, exerting a drag on potential growth in advanced, emerging market, and developing economies," they said.
Looking at the growth rates for previous years, a slowdown in Britain’s economy was quickly evident, with the rate of GDP growth dropping from 1.9% in 2016 to the 1.5% predicted for 2019, yet that was far less than many had anticipated before the Brexit vote.