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IMF warns global recession 'may be closer than we think'

Author
AP,
Publish Date
Tue, 23 Jan 2018, 5:57PM
The biggest risk to the world economy is complacency, the International Monetary Fund warned at Davos. (Picture / AP)
The biggest risk to the world economy is complacency, the International Monetary Fund warned at Davos. (Picture / AP)

IMF warns global recession 'may be closer than we think'

Author
AP,
Publish Date
Tue, 23 Jan 2018, 5:57PM


The International Monetary Fund has upgraded its outlook for the world economy, noting surprisingly strong growth in Europe and Asia and predicting that US tax cuts will give the American economy a short-term boost.

The IMF on Monday forecast global growth of 3.7 per cent for 2017, which would be the most substantial annual growth since 2011, and to 3.9 per cent for this year and 2019.

"Global growth has been accelerating since 2016, and all signs point to a continuous strengthening of that growth," IMF managing director Christine Lagarde said in a press conference at the World Economic Forum's annual meeting in Davos, Switzerland. "This is very welcome news."

The international lending agency says 120 countries, representing three-quarters of world economic output, enjoyed economic growth in 2017, creating the broadest global expansion in seven years. World trade is expanding, and consumers are more confident.

The IMF expects the US growth to accelerate to 2.7 per cent this year, from 2.3 per cent in 2017, citing increased investment as businesses take advantage of lower corporate tax rates.

The 19 countries that use the euro currency collectively grew 2.4 per cent in 2017, best since 2007, and will grow 2.2 per cent this year, the IMF said.

The Chinese economy, the world's second-biggest, is believed to have grown 6.8 per cent in 2017. But China's growth is forecast to slow to 6.6 per cent this year and 6.4 per cent in 2019. Beijing is attempting to move the economy away from fast but unsustainable growth based on massive investment to slower, steadier growth built around consumer spending.

However, the IMF warned that a long period of low global interest rates may have inflated the prices of assets such as stocks, raising the threat of a correction that could hurt confidence and growth.

Lagarde urged countries to take advantage of healthy growth to enact reforms that will make their economies more efficient to spread prosperity to those who have been left behind. "Complacency is actually one of the risks should guard against," she said.

The Daily Telegraph reports that one of Lagarde's colleagues, Maurice Obstfeld, warned countries to expect an era of lower growth.

He urged politicians to prepare for the potential of another global recession.

"Now is the time to build policy buffers, reinforce defences against financial instability, and invest in structural reforms, productive infrastructure, and people.

"The next recession may be closer than we think, and the ammunition with which to combat it is much more limited than a decade ago, notably because public debts are so much higher."

- AP

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