The International Monetary Fund on Tuesday today projected a marginally higher than expected growth for the world economy at 3.5 per cent in 2017, with a top official of the global lender saying that despite these signs of strength, many countries will continue to "struggle" this year.
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"Momentum in the global economy has been building since the middle of last year, allowing us to reaffirm our earlier forecasts of higher global growth this year and next," Maurice Obstfeld, economic counsellor and director of the IMF research department, told reporters at a news conference in New York.
"We project the world economy to grow at a pace of 3.5 per cent in 2017, up from 3.1 per cent last year, and 3.6 per cent in 2018," Obstfeld said.
"Acceleration will be broad-based across advanced, emerging, and low income economies, building on gains we have seen in both manufacturing and trade," he said.
The IMF's new projection for 2017 is marginally higher than what it expected in its last update. This improvement comes primarily from good economic news for Europe and Asia, and within Asia, notably for China and Japan, he said.
It retained its growth projection for India at 7.2 per cent for 2017-18, while calling for accelerated economic reforms to achieve a higher growth trajectory (See: IMF maintains 7.2% India growth forecast for 2018).
IMF, however, 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, IMF said.
"Despite these signs of strength, many other countries will continue to struggle this year with growth rates significantly below past readings. 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," Obstfeld said.
"At the same time, a combination of adverse weather conditions and civil unrest threaten several low-income countries with mass starvation. In Sub-Saharan Africa, income growth could fall slightly short of population growth, but not by nearly as much as last year," he said.
"So, the world economy may be gaining momentum, but we cannot be sure that we are out of the woods. How can countries safeguard and nurture the global recovery?" he said.
However, Obstfeld said the global economy seems to be gaining momentum.
"We could be at a turning point. But even as things look up, the post–World War II system of international economic relations is under severe strain despite the aggregate benefits it has delivered - and precisely because growth and the resulting economic adjustments have too often entailed unequal rewards and costs within countries," he said.
"Policy must address these disparities head-on to ensure the stability of an open, collaborative trading system that benefits all," he added.
According to the report, credible strategies were needed in many countries to place public debt on a sustainable path.
"Adjusting to lower commodity revenues and addressing financial vulnerabilities remain key challenges for many emerging market and developing economies. The world also needs a renewed multilateral effort to tackle a number of common challenges in an integrated global economy," the report said.