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WEF highlights: IMF Predicts Global Growth for 2018—But It’s Not All Good News

The World Economic Forum Annual Meeting is currently happening in Davos, Switzerland from January 23 to 26, where key political and economics leaders come together to talk about several issues throughout the world.

If you haven’t been tuning into the panels, the International Monetary Fund raised its global growth forecasts for 2018, bringing global growth to 3.9 percent. This growth comes very much welcomed by many leaders since it is the fastest pace of growth in seven years. This also means that this is the best time for recovery for many struggling countries as the world finally comes out of recession.

120 countries saw stronger growth for three quarters and contributed to the pick-up in the global growth, making this year the broadest synchronized global growth surge since the 2010 recession.

 

 

IMF Managing Director Christine Lagarde said, “[This is the] perfect opportunity now for world leaders to repair their roof. Growth in our view needs to be more inclusive.”

At a glance, projected US growth remains to be the highest among economies at 2.7 percent. But these earlier gains for the US will see a downhill by 2020, as the nation’s current-account deficit will widen with the stronger demand and imports.

Asian markets are also picking up as IMF reports a 1.2 percent growth for Japan, and 6.6 percent for China.

Because of the global growth prediction from IMF, Asian stock markets have seen a boost this week. After IMF’s report was released, Japan’s benchmark Nikkei 225 index went up the biggest at 1.3 percent to 24,117.51. Hong Kong’s Hang Seng also rose a close 1.2 percent to 32,766.46 while South Korea’s Kospi jumped 1.1 percent to 2,529.95. China also mirrored the growth as the Shanghai Composite climbed 0.3 percent to 3,513.40.

While the growth of many large nations are promising, IMF chief economist Maurice Obstfeld warns that the durability of this recovery will slow in the next years as economies like the US and China approach the limits of their growth potential. He also warns that the world may be facing a recession sooner that they expect, and the economies will be armed with less ammunition to deal with the crisis than last decade’s recession.

According to the IMF, countries should start taking steps to raise their potential growth even further and safeguard their economies in the upcoming years. Policy makers should start looking at ways to boost their economies’ resilience to financial shocks via proactive financial regulation.