IMF warns of protectionist threat to global growth

The IMF on Tuesday left its global economic forecasts unchanged into 2017 but called governments to take action against the threats of low growth and protectionism.

Global output is expected to grow this year at a rate of 3.1 per cent before rising to 3.4 per cent next year, estimates that are unchanged from July, according to the International Monetary Fund.

But the Fund downgraded forecasts both for growth in global trade volume and for advanced economies’ output, saying that prospects for richer countries had darkened this year.

“It is vitally important to defend the prospects for increasing trade integration,” said IMF chief economist Maurice Obstfeld.

“Turning back the clock on trade can only deepen and prolong the world economy’s current doldrums.”

The IMF notably cut its growth forecast for the United States, the world’s largest economy, but upgraded those for Japan and the eurozone.

“Taken as a whole, the world economy has moved sideways,” Mr Obstfeld said in remarks accompanying the new forecast.

He said that “sub-par growth” was stirring negative economic and political forces around the world.

The IMF downgraded its outlook for advanced economies this year by 0.2 percentage points to 1.6 per cent but raised it slightly for emerging and developing economies to 4.2 per cent. Next year’s forecasts were unchanged.

The world trade outlook also soured, with growth pegged at 2.3 per cent this year, 0.4 percentage points lower than forecast in July, before rising to 3.8 per cent in 2017.

“Over the medium term, while we expect that advanced economies will continue along a disappointingly low growth path, emerging market and developing economies should accelerate,” said Mr Obstfeld.

The IMF’s projections faced notable risks, however, such as further economic shocks in China, a continued fall in commodity prices and the sudden imposition of new trade barriers.

“Geopolitical tensions could flare up, adding to the humanitarian crises already afoot in the Middle East and Africa,” the report said.

Follow The National's Business section on Twitter