Maurice Obstfeld, Economic Counsellor and Director of the Research Department IMF, said Tuesday about World Economic Outlook that “In sub‑Saharan Africa, income growth could fall slightly short of population growth, though not by nearly as much as last year, in our estimation”.
He said momentum in the global economy has been building since the middle of last year, allowing the IMF to reaffirm earlier forecasts of higher global growth this year and next.
“We project the world economy to grow at a pace of 3.5 percent in 2017, up from 3.1 percent last year, and at a pace of 3.6 percent in 2018. Acceleration will be broad‑based across advanced, emerging and low‑income countries, building on gains we have seen in both manufacturing and trade.
“Our new projection for 2017 is marginally higher than what we expected in our last update back in January. This improvement comes primarily from good economic news for Europe and Asia, as well as our continuing expectation for higher growth this year in the US. Despite these signs of strength, many other countries will continue to struggle this year, with growth rates significantly lower than past readings,” he said.
Obstfeld said commodity prices have firmed since early 2016, but at low levels, and many commodity exporters remain challenged, notably in the Middle East, Africa, and Latin America, further noting that at the same time, a combination of adverse weather conditions and civil unrest threatens several low‑income countries with mass starvation.
He noted that whether the current momentum will be sustained remains a question mark, but there are clearly upside possibilities reiterating that consumer and business confidence in advanced economies could rise further, though confidence indicators are already at elevated levels.
“On the other hand, the world economy still faces headwinds. For one thing, trend productivity growth remains subdued across the world economy for complex reasons that we have explored in a recent paper and that seem likely to persist for some time. In addition, several prominent downside risks threaten our baseline forecast.
“One set of uncertainties stems from macroeconomic policies in the two largest economies. In the US, the Federal Reserve has embarked on monetary normalization and may soon begin to scale back the size of its balance sheet. Given the faster US recovery, we could see more upward pressure on the dollar, as interest rate hikes are not yet imminent for the Bank of Japan or the European Central Bank.
“At the same time, however, US fiscal policy still seems likely to turn more expansionary over the next couple of years. If the slack remaining in the US economy is small, the result could be inflation and a faster‑than‑expected pace of interest rate rises, reinforcing dollar strength and possibly causing difficulties for emerging and some developing economies, especially those with dollar pegs or extensive dollar‑denominated debts,” he said.