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The global economy is gaining momentum with both rich and emerging economies seeing better growth prospects even as the “sword of protectionism” threatens to scupper growth, according to the head of the International Monetary Fund.
In a speech in Brussels previewing next week’s release of the IMF’s latest global growth forecasts, Christine Lagarde on Wednesday said the world’s economic recovery was strengthening.
A broad upswing in manufacturing activity in the US and other rich economies, stronger growth in developing economies and the benefits of higher commodity prices for low-income countries were all contributing to stronger global growth, the IMF’s managing director said.
“The good news is that, after six years of disappointing growth, the world economy is gaining momentum as a cyclical recovery holds out the promise of more jobs, higher incomes, and greater prosperity going forward,” Ms Lagarde said.
The IMF in January said it expected the world economy to grow 3.4 per cent in 2017 after expanding by 3.1 per cent in 2016, predicting that an acceleration that began in the second-half of 2016 in the US in particular would continue into this year.
It is due to release its latest forecast for global growth on Tuesday in Washington ahead of the IMF and World Bank’s spring meetings in the US capital.
But Ms Lagarde said plenty of uncertainty – most of it political – still hangs over the global economy.
Ms Lagarde declined to name Donald Trump, the new US president, or to identify either the UK’s decision to leave the EU or Marine Le Pen’s run for the French presidency.
But she made clear that doubts about the benefits of globalisation and the international order ranked alongside the international impact of the Federal Reserve’s expected move to continue raising interest rates as potential threats to global growth.
“We also see—at least in some advanced economies—doubts about the benefits of economic integration, about the very “architecture” that has underpinned the world economy for more than seven decades,” she said.
“There are clear downside risks: political uncertainty, including in Europe; the sword of protectionism hanging over global trade; and tighter global financial conditions that could trigger disruptive capital outflows from emerging and developing economies.”