In its January 2014 World Economic Outlook (WEO) Update the IMF presents a cautiously encouraging outlook for the global economy.
The IMF projects global economic growth to increase from 3 per cent in 2013 to 3.7 per cent in 2014, slightly higher than the 3.6 per cent forecast in the October 2013 WEO.
The IMF’s outlook for the United States has improved in 2014 owing to strengthening domestic demand and support from the recent budget deal. The IMF now expects the US economy to grow 2.8 per cent this calendar year.
The update also highlights that the Euro area is turning the corner from recession to recovery, with the IMF projecting growth to strengthen to 1.0 per cent in 2014 and 1.4 per cent in 2015, slightly upgrading its October projections.
The IMF continues to project strong growth for our region, with forecasts for China and India slightly higher since the October WEO. China and India are now expected to grow 7.5 and 5.4 per cent respectively in 2014.
More broadly in emerging market economies, stronger external demand from advanced economies will boost growth, although domestic weaknesses remain. The IMF notes that increased financial market and capital flow volatility will remain a concern for emerging market economies as the US begins to normalise its monetary policy.
The IMF underscores the importance of managing vulnerabilities, notwithstanding the expected strengthening in global economic activity.