Growth in Japan, the world’s number 3 economy, is expected to remain subdued at 0.5% this year and 0.6% in 2017.
Growth in Japan, the world’s number 3 economy, is expected to remain subdued at 0.5% this year and 0.6% in 2017.

World Economy Moving Sideways

To support growth in the near term, the central banks in advanced economies have been advised to maintain easy monetary policies

World Economy Moving Sideways

Global economic growth will remain subdued this year following a slowdown in the United States and Britain’s vote to leave the European Union, the International Monetary Fund said in its October 2016 World Economic Outlook.
“Taken as a whole, the world economy has moved sideways,” said IMF chief economist and economic counsellor, Maurice Obstfeld. “We have slightly marked down 2016 growth prospects for advanced economies while marking up those in the rest of the world,” he said, IMF reported.
The report highlighted the precarious nature of the recovery eight years after the global financial crisis. It raised the specter that persistent stagnation, particularly in advanced economies, could further fuel populist calls for restrictions on trade and immigration. Obstfeld said such restrictions would hamper productivity, growth and innovation.
“It is vitally important to defend the prospects for increasing trade integration,’’ Obstfeld, said. “Turning back the clock on trade can only deepen and prolong the world economy’s current doldrums.”
To support growth in the near term, the central banks in advanced economies should maintain easy monetary policies, the IMF said. But monetary policy alone won’t restore vigor to economies dogged by slowing productivity growth and aging populations, according to the new report. Where possible, governments should spend more on education, technology, and infrastructure to expand productive capacity while taking steps to alleviate inequality.
The world economy will expand 3.1% this year, the IMF said, unchanged from its July projection. Next year, growth will increase slightly to 3.4% on the back of recoveries in major emerging market nations, including Russia and Brazil.

  Advanced Economies
Advanced economies will expand just 1.6% in 2016, less than last year’s 2.1% pace and down from the July forecast of 1.8%.
The IMF marked down its forecast for the United States this year to 1.6%, from 2.2% in July, following a disappointing first half caused by weak business investment and diminishing pace of stockpiles of goods. US growth is likely to pick up to 2.2% next year as the drag from lower energy prices and dollar strength fades.
Further increases in the Federal Reserve’s policy rate “should be gradual and tied to clear signs that wages and prices are firming durably,” the IMF said.
Uncertainty following the “Brexit’’ referendum in June will take a toll on the confidence of investors. UK growth is predicted to slow to 1.8% this year and to 1.1% in 2017, down from 2.2% last year.
The eurozone will expand 1.7% this year and 1.5% next year, compared with 2% growth in 2015.
Growth in Japan, the world’s number 3 economy, is expected to remain subdued at 0.5% this year and 0.6% in 2017.

  Emerging Markets to Grow
In emerging markets and developing economies, growth will accelerate for the first time in six years, to 4.2%, slightly higher than the July forecast of 4.1%. Next year, emerging economies are expected to grow 4.6%.
However, prospects differ sharply across countries and regions.
China’s economy, the world’s second largest, is forecast to expand 6.6% this year and 6.2% in 2017, down from growth of 6.9% last year.
Growth in emerging Asia, and especially India, continues to be resilient. India’s gross domestic product is projected to expand 7.6% this year and next, the fastest pace among the world’s major economies.
Sub-Saharan Africa’s largest economies continue to struggle with lower commodity revenues, weighing on growth in the region. Nigeria’s economy is forecast to shrink 1.7% in 2016, and South Africa’s will barely expand. By contrast, several of the region’s non-commodity exporters, including Cote d’Ivoire, Ethiopia, Kenya, and Senegal, are expected to continue to grow at a robust pace of more than 5% this year.
In Latin America, Venezuela’s output is forecast to plunge 10% this year and shrink another 4.5% in 2017. Brazil will see a contraction of 3.3% this year, but is expected to grow at 0.5% in 2017.
Countries in the Middle East are still confronting challenging conditions from subdued oil prices, as well as civil conflict and terrorism.

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