International Monetary Fund keeps 6.8% growth forecast for PHL on higher public spending

Apr 19, 2017, 01:38
International Monetary Fund keeps 6.8% growth forecast for PHL on higher public spending

While the forecast growth for many economies has been increased slightly, the 0.5% rise in predicted United Kingdom growth this year is striking - it is, by far, the biggest change made in any of the IMF's forecasts.

South Africa, which was hit by slow growth in 2016 was expected to register a slight improvement of 0.8 percent, up from 0.3 percent in 2016, as the impact of devastating drought was beginning to recede and electricity capacity improved.

The Italian economy will grow by 0.8% both this year and next, according to estimates from the "World Economic Outlook", nearly unchanged compared to those of January.

The IMF estimated emerging markets and developing economies will grow by 4.5 percent in 2017 and 4.8 percent in 2018, the same forecast as that of January. Thanks in part to relief over China's prospects, global commodity prices have stabilized after plummeting from mid-2014 to early 2016.

Moreover, spillovers from slower growth in China or higher global financial volatility should be manageable for the Philippines because of its strong economic fundamentals, ample policy space, and limited trade and financial linkages with China, Peiris said.

If confidence and the attitude of markets remains strong, according to the document, in the short term growth could surprise on the positive side.

Euro zone growth was placed at 1.7%, up 0.1% from its January estimate and unchanged from the 2016 performance.

The IMF expects India to be the fastest growing major economy in 2017, expanding by 7.2%, despite its rocky demonetization program.

That's the picture sketched Tuesday by the International Monetary Fund, which predicts that the world economy will grow 3.5 percent this year, up from 3.1 percent in 2016. "In India, the growth forecast for 2017 has been trimmed by 0.4 percentage point to 7.2 per cent, primarily because of the temporary negative consumption shock induced by cash shortages and payment disruptions from the recent currency exchange initiative".

The IMFs new projection for 2017 is marginally higher than what they expected in its last update. The IMF also forecast that all five of Europe's largest economies will grow even faster.

In countries in which growth is insufficient, monetary policy has to be accommodative (a reference to the European Central Bank) but it can not work on its own, the IMF says, underlining once again the need to clean up bank balance sheets, facing the issue of non-performing loans (NPLs), a problem that is particularly acute in Italy, and strengthening the efficiency of banks.

The Nov. 3 decision to float the currency was pivotal in helping Egypt secure a $12 billion International Monetary Fund loan, though it also caused inflation to surge above 30 percent.

Issac John Associate Business Editor of Khaleej Times, is a well-connected Indian journalist and an economic and financial commentator. A post-graduate in English and graduate in economics, he has won over two dozen awards.

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