IMF Raises Global Growth Forecasts

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However, Maurice Obstfeld, IMF Economic Counsellor and Director of Research briefing media on the key findings of the WEO update, had a word of caution. In its World Economic Outlook, presented at the Davos-based World Economic Forum, it said the two forecasts had improved respectively by 0.3 and 0.2 percentage points.

The IMF said it expects the tax law to stimulate economic activity in the the near-term and assumes that lower federal revenue in the short-run due to the tax cuts will not be offset by spending cuts.

"The stronger momentum experienced in 2017 is expected to carry into 2018 and 2019, with global growth revised up to 3.9% for both years", reads the report.

The stronger outlook was attributed to the stronger momentum in domestic demand and higher external demand.

But it forecasts growth in the United Kingdom at 1.5% in each of 2018 and 2019, lagging well behind the average pace of fellow advanced economies - having led the pack as recently as 2016. This is very welcome news.

Last year's slowdown has been blamed on the squeeze on consumers caused by higher inflation - largely the result of the pound's plunge after the Brexit vote - as well as uncertainty over Britain's future outside the EU.

"The next recession may be closer than we think, and the ammunition with which to combat it is much more limited than a decade ago, notably because public debts are so much higher", he said. The region continues to account for over half of world growth.

"Rich asset valuations and very compressed term premiums raise the possibility of a financial market correction, which could dampen growth and confidence." the International Monetary Fund said.

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The IMF said the current cyclical upswing provides an ideal opportunity for reforms.

The Update estimated United States growth at 2.3 percent for last year and forecast a growth rate of 2.7 percent this year and 2.5 percent next year. "China alone is providing one-third of global growth".

But it has warned that extreme weather events - such as droughts in Australia, and hurricanes in the Atlantic - pose a significant risk to its positive forecasts, saying "recurrent, potent climate events" impose "devastating humanitarian costs and economic losses" on affected regions.

The Chinese economy, the world's second-biggest, is believed to have grown 6.8 percent in 2017.

The IMF said even though the economic "rebound could prove stronger in the near term", the risks to the global forecast remain tilted to the downside.

The survey will come as a booster for Prime Minister Narendra Modi who will court worldwide investors on Monday and Tuesday in a bid to get more investment into the country, especially in the manufacturing sector, which has remained sluggish and is crucial to job creation.

And the absence of worries in the near term could prompt financial market players to look for riskier and more profitable investments "and amplify the buildup of financial vulnerabilities", the International Monetary Fund warned.