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Business Reporter
The International Monetary Fund (IMF) is upbeat about global economic growth for both 2018 and 2019, raising its forecast to 3,9 percent in each of these years on the back of supportive financial conditions. The international lender released its World Economic Outlook report in Washington DC yesterday, ahead of the IMF/World Bank Group Spring Meetings.

If achieved the 2018 growth rate will be the fastest since 2011 as it will eclipse the previous fastest rate of 3,8 percent global growth achieved in 2017.

“With financial conditions still supportive, global growth is expected to tick up to a 3,9 percent rate in both 2018 and 2019,” said the IMF.

The international lender said advanced economies will grow faster than potential this year and next while the euro area economies are set to narrow excess capacity with support from accommodative monetary policy.

The IMF said aggregate growth in emerging market and developing economies is projected to firm further, with continued strong growth in emerging Asia and Europe and a modest upswing in commodity exporters after three years of weak performance.

The IMF also projected that Gross Domestic Product growth in Sub-Saharan Africa will increase gradually during 2018–19 to 3,4 percent and 3,7 percent, respectively, as commodity prices rise.

While the headline numbers suggest a broadly unchanged picture relative to the October WEO, revisions to growth projections for key large economies point to underlying differences in prospects across the region.

In Nigeria, the economy is projected to grow 2,1 percent in 2018 and 1,9 percent in 2019 (up from 0,8 percent in 2017), reflecting improved oil prices, revenue, and production and recently introduced foreign exchange measures that contribute to better foreign exchange availability.

The forecast is 0,2 percentage point stronger in each year relative to the October WEO forecast.
Similarly, for the region’s other large oil dependent economy, Angola, growth is projected to rise from 0,7 percent in 2017 to 2,2 percent in 2018 and 2,4 percent in 2019 (upward revisions of 0,6 and 1,0 percentage point, respectively, relative tov to the October WEO) as the firming of oil prices lifts disposable income and business sentiment improves.

Growth in South Africa is also expected to strengthen from 1,3 percent in 2017 to 1,5 percent in 2018 and 1,7 percent in 2019, (stronger than in the October WEO by 0,4 and 0,1 percentage point, respectively, for 2018 and 2019).

The IMF said business confidence in South Africa is likely to gradually firm up as political uncertainty diminishes, but growth prospects remain weighed down by structural bottlenecks.

Meanwhile inflation in sub-Saharan Africa is projected to moderate slightly in 2018 and 2019 but is expected to remain in double digits in key large economies, reflecting the pass-through effects of currency depreciation and their impact on inflation expectations (Angola), supply factors, and assumed monetary policy accommodation to support fiscal policy (Nigeria).
The IMF however said although global growth was on an upswing, the favourable conditions will not last forever.

This positive momentum, said the IMF will eventually slow leaving many countries with a challenging medium-term outlook.
Some cyclical forces will wane: financial conditions are expected to tighten naturally with the closing of output gaps and monetary policy normalisation.

“US tax reform will subtract momentum starting in 2020, and then more strongly as full investment expensing is phased out starting in 2023; and China’s transition to lower growth is expected to resume as credit growth and fiscal stimulus diminish.”
The IMF said now was the moment to get ready for leaner times.

“Readiness requires not only cautious and forward-looking management of monetary and fiscal policies, but also careful attention to financial stability,” said the IMF adding that structural and tax policies are also necessary in order to raise potential output and ensuring that the fruits of growth are widely shared.

“While there is much each country can do on its own, multilateral cooperation on a range of issues—stretching from trade to reducing global imbalances to cybersecurity to climate — remains essential.”

This positive momentum will eventually slow, however, leaving many countries with a challenging medium-term outlook.