IMF's increased positivity on global growth

It doesn't quite share the Department of Finance's optimism over Ireland's GDP, however...

IMF's increased positivity on global growth

Picture by Itsuo Inouye AP/Press Association Images

The International Monetary Fund (IMF) has predicted that Ireland's economy will grow by 3.5% this year and 3.2% in 2018.

The IMF's latest estimate for Ireland falls below the Department of Finance's recently revised prediction – last week it upgraded its forecast to 4.3% growth this year and 3.8% next year.

The IMF's 2017 projection is in line with the Central Bank, which also expects 3.5% growth this year.

World Economic Outlook

Turning to matters global,the  Washington-based institution's new World Economic Outlook report expects growth of 3.5% overall this year. This forecast is up from 3.1% last year and 3.4% in January, and owes to "buoyant financial markets and a long-awaited cyclical recovery in manufacturing and trade".

Its 2018 projection of 3.6% growth remains unchanged.

Euro zone growth was placed at 1.7%, up 0.1% from its January estimate and unchanged from the 2016 performance. The IMF believes euro zone growth will then slow to 1.6% in 2018.

Its report states:

"The euro area recovery is expected to proceed at a broadly similar pace in 2017-18 as in 2016.

"The modest recovery is projected to be supported by a mildly expansionary fiscal stance, accommodative financial conditions, a weaker euro, and beneficial spillovers from a likely US fiscal stimulus."

IMF managing director Christine Lagarde 

The report continues:

"Political uncertainty as elections approach in several countries, coupled with uncertainty about the European Union's future relationships with the United Kingdom, is expected to weigh on activity."

The IMF does not foresee the Brexit vote particularly hurting the UK, however.

Arriving on the same day British Prime Minister Theresa May announced a snap general election, the report states that Britain's economy is expected to grow by 2% this year, up from its 1.5% estimate in January.

Projected growth was revised upward in the United States, reflecting the assumed fiscal policy easing and an uptick in confidence, especially after the election of Donald Trump in November, which, if it persists, will reinforce the cyclical momentum.

The IMF forecasts that growth will remain strong in China and many other commodity importers, with activity also projected to pick up "markedly" in emerging markets and developing economies.

Risks and recovery

Striking a cautious note elsewhere, the IMF said:

"Binding structural impediments continue to hold back a stronger recovery, and the balance of risks remains tilted to the downside, especially over the medium term. With persistent structural problems – such as low productivity growth and high income inequality – pressures for inward-looking policies are increasing in advanced economies.

"These threaten global economic integration and the cooperative global economic order that has served the world economy, especially emerging market and developing economies, well. Against this backdrop, economic policies have an important role to play in staving off downside risks and securing the recovery."