The global economic recovery is improving and picking up steam, but still faces a series of threats that could erode the improvements, especially the rise of protectionist rhetoric, the International Monetary Fund warned Tuesday.
The fund’s semi-annual World Economic Outlook report revised global growth up to 3.5 percent for this year, one-tenth higher than the January forecast.
It was a rare upward revision to the growth forecast — the first in two years — which has been consistently disappointing. For 2018, growth is expected to rise to 3.6 percent, and to 3.8 percent by 2022.
“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,” IMF chief economist Maurice Obstfeld said.
The report warns of the “significant downside risks” to the outlook, which have gotten worse since January — among them, “the turn towards protectionism, leading to trade warfare,” Obstfeld said in the foreword of the report.
Many of the concerns — including rolling back financial regulation, pulling away from the multilateral trading system and restricting immigration — are centrepieces of US President Donald Trump’s policy program, but also are issues visible in the bitter French election campaign, as well as in Britain’s planned exit from the European Union.
The anti-trade, anti-immigration attitude in advanced economies is to some degree understandable, given “the failure of growth gains in rich economies to substantially reach those in the lower parts of the income distribution in recent decades,” he said.
However, Obstfeld warned: “Capitulating to those pressures would result in a self-inflicted wound,” which would harm countries by pushing prices higher and eroding household income, prompt retaliation, and worsen the global economy.”
