Australia’s economic growth will reach 3.1% in 2017, according to the latest World Economic Outlook produced by the International Monetary Fund (IMF). This compares with global growth that the IMF forecasts will be 3.5% for the year. In all, the IMF retains its negative stance on the global economy, stating that the “…balance of risks remains tilted to the downside, especially over the medium term.” Overall, advanced economies are projected to grow more strongly than previously forecast, while emerging and developing economies are not expected to perform as well as previously thought.
The chart below shows the IMF’s projections for global GDP growth, in six-monthly intervals.
The slight uptick in the global forecast reverses a two-and-a-half year trend.
But, its important to note that most of this is the expected up-lift is in economic growth in advanced economies. The target for improvements is largely the Eurozone, which is finally and slowly coming out of its decade long malaise. This is despite the UK’s ‘Brexit’, although the effects of that event are expected to be a drag on global GDP by mid-2018.
Assumptions include that the Trump Presidency will result in both fiscal stimulus and lower taxes, leading to improved economic growth. Leaving aside that there is no consensus that lower taxes automatically contribute to improved economic growth, we can turn to The Guardian’s Greg Jericho for the most pithy riposte on the US’s growth assumptions:
“Given the difficulty Donald Trump apparently has doing anything other than finding his way to a golf course, and his utter incompetence in passing any major legislative measures, that is a very big assumption.”
The chart below shows the IMF’s projections for Australia’s GDP growth, up to 2017.
Now, just as relevant as the US assumptions, the IMF focuses its attention for Australia on expectations of solid exports of gas, iron ore and coal. But to underscore just how challenging the assumptions can be, already, the policy settings associated with gas exports are under pressure. The likely ‘domestic supply’ or ‘reserving’ policy announced by the Turnbull Government in late April could see Australia’s economic growth curtailed, at least under this measurement.
In any event, the IMF forecasts Australia’s annual GDP growth will slip away after 2017, falling progressively to 2.6% by 2022. For an advanced economy, that is within, but toward the bottom-end, of the target ranges set by governments and central banks.
The dismal scientists at the IMF appear to have taken what for economists are happy pills in recent months. But have no fear, those longer-term forecasts suggest they expect the global economy to wean them off their outpouring of joy in the quite near future.
Link is: http://www.imf.org/en/Publications/WEO/Issues/2017/04/04/world-economic-outlook-april-2017#Summary
