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IMF shaves Growth Estimate for Advanced Economies in 2016

The International Monetary Fund (IMF) estimates output from advanced economies in 2016 will be slower than previously forecast. In the October edition of the World Economic Outlook, the IMF shaved its advanced economies’ growth estimate from 1.8% to 1.6%. This revision was driven by slower than anticipated growth in the US (1.6% compared to 2.2% in the July edition) and Canada (1.2% compared to 1.4%), despite improved growth estimates for the Euro area (up from 1.6% to 1.7%), Japan (up from 0.3% to 0.5%) and the UK (up from 1.7% to 1.8%).

The outlook for 2017 is marginally firmer than 2016, with global growth estimated at 3.4% in 2017 compared to 3.1% in 2016. As is the expectation for 2016, global growth is anticipated to be driven by emerging and developing economies, while advanced economies’ growth remains subdued (at 1.8%).

The IMF warned persistent stagflation (high unemployment, high inflation and low economic growth conditions) could result in increased protectionist sentiment, which would be detrimental to economic growth, productivity and innovation. The IMF called for monetary policy conditions to remain loose and for governments to invest further in education, technology and infrastructure in order to support growth.

The outlook for Australia’s most prominent export destinations is mostly firmer, with increased growth expectations for Japan, emerging and developing Asia and India as well as unchanged expectations for China in 2016. Similar outcomes are anticipated for 2017. The IMF estimates Australia will post real economic growth of 2.9% in 2016 and 2.7% in 2017 (compared to 2.4% in 2015).

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