IMF Trims Advanced Economies' Growth Outlook

(RTTNews) - Advanced economies should intensify monetary, fiscal and structural efforts to boost growth in order to avoid adding strength to protectionist calls, the International Monetary Fund said Tuesday, as it trimmed their growth forecasts.

The Washington-based lender retained the global growth forecasts for this year and next at 3.1 percent and 3.4 percent, respectively, in its latest World Economic Outlook report.

Global growth is expected to pick up slightly next year, on the back of strength from emerging markets, the report said.

Growth projection for advanced economies for this year was cut to 1.6 percent from 1.8 percent. The outlook for next year was retained at 1.8 percent.

"Taken as a whole, the world economy has moved sideways," IMF Chief Economist Maurice Obstfeld said.

Stressing on the vital importance to defend the prospects for increasing trade integration, Obstfeld cautioned that turning back the clock on trade can only deepen and prolong the world economy's current doldrums.

The IMF urged central banks in advanced economies to maintain easy monetary policies, while adding that such measures alone will not restore vigor to economies dogged by slowing productivity growth and aging populations.

The IMF cut the U.S. growth outlook sharply. The growth forecast for this year was lowered to 1.6 percent from 2.2 percent and the prediction for next year was cut to 2.2 percent from 2.5 percent. The IMF attributed the downgrade to following a disappointing first half caused by weak business investment and diminishing pace of stockpiles of goods.

The lender also said that further increases in the Federal Reserve's policy rate should be gradual and tied to clear signs that wages and prices are firming durably.

Meanwhile, Eurozone's growth forecast for this year and next was raised by 0.1 percentage points to 1.7 percent and 1.5 percent, respectively. Among the big four, growth forecasts for Germany and Spain were also boosted, but the projections for France and Italy were lowered.

"The European Central Bank should maintain its current appropriately accommodative stance," the IMF said. "Additional easing through expanded asset purchases may be needed if inflation fails to pick up."

Japan also had its growth forecasts raised to 0.5 percent his year and 0.6 percent for next year. Canada, however, had its outlook trimmed to 1.2 percent and 1.9 percent, respectively. The IMF expects ultra-loose monetary policy to support growth in the near term, while a shrinking population is likely to hurt prospects going forward.

Despite the lingering uncertainty over "Brexit", the U.K. is set to log the second fastest growth among advanced economies this year, the report showed. The country's growth projection was raised to 1.8 percent from 1.7 percent. The outlook for next year was cut to 1.1 percent from 1.3 percent.

Emerging market and developing economies are set to expand 4.2 percent this year, which was slightly faster than 4.1 percent predicted in July. The outlook for next year was unchanged at 4.6 percent.

China's growth projections were retained at 6.6 percent and 6.2 percent, respectively. India's growth forecast for both years were raised by 0.2 percentage points each to 7.6 percent.

Brazil is seen contracting 3.3 percent this year, but emerge from recession next year with 0.5 percent growth. The July projections were thus retained.

Russia is also seen stuck in recession this year with 0.8 percent GDP decline, but exit the weakness next year with 1.1 percent expansion.