IMF expects Irish economy to grow by 3.5% in 2017

Figure is lower than Government estimate, but body says global growth will rise 3.5%

International Monetary Fund (IMF) managing director Christine Lagarde: The body’s World Economic Outlook has revised Britain’s growth forecast after a stronger-than-expected economic performance since the Brexit vote. Photograph: Stephen Jaffe/EPA

International Monetary Fund (IMF) managing director Christine Lagarde: The body’s World Economic Outlook has revised Britain’s growth forecast after a stronger-than-expected economic performance since the Brexit vote. Photograph: Stephen Jaffe/EPA

 

The International Monetary Fund (IMF) has said it expects the Irish economy to grow by 3.5 per cent in 2017 and 3.2 per cent next year.

This is below the Department of Finance’s revised estimate of 4.3 per cent growth for 2017.

The Washington-based organisation on Tuesday again upped its forecast for global growth this year due to buoyant financial markets and a cyclical recovery in manufacturing and trade.

The body’s forecast rose from 3.1 per cent last year to 3.4 per cent in January. In its latest World Economic Outlook it said it now sees global growth rising 3.5 per cent in 2017.

The IMF kept its projection for 2018 unchanged at 3.6 per cent.

Structural impediments

While highlighting a number of positive developments, the body warned that binding structural impediments continue to hold back a stronger recovery, with “a balance of risks that remains tilted to the downside, especially over the medium term”.

“Structural problems – such as low productivity growth and high income inequality – are likely to persist. Inward-looking policies threaten global economic integration and the co-operative global economic order, which have served the world economy – especially emerging market and developing economies – well,” the IMF said.

Global growth is forecast to increase marginally beyond 2018, reaching 3.8 per cent by 2022, the IMF said. However, this pick-up in global activity will come entirely from developments in emerging markets, where growth is projected to increase to 5 per cent by the end of the forecast period.

Economic activity in advanced economies as a group is now forecast to grow by 2 per cent in 2017 and 2018, 0.2 percentage point higher than expected in October 2016.

Euro zone output

Output in the euro zone is forecast to grow by 1.7 per cent this year and 1.6 per cent in 2018. Growth is forecast to soften in Germany , Italy and Spain, but to increase modestly in France.

“The medium-term outlook for the euro area as a whole remains dim, as projected potential growth is held back by weak productivity, adverse demographics and, in some countries, unresolved legacy problems of public and private debt overhang, with a high level of non-performing loans,” the IMF said.

The IMF revised Britain’s growth forecast to 2 per cent for 2017, up a half percentage point from January, before declining to 1.5 per cent in 2018.

Stronger than expected

The revision comes after a stronger-than-expected performance of the economy since the Brexit vote last June. The organisation said negative effects from the vote, including reduced consumer purchasing power, will likely materialise at a slower rate than initially anticipated.

The organisation held its 2017 US growth forecast steady at 2.3 per cent, which still represents a substantial jump from 1.6 per cent growth in 2016, largely due to expectations that president Donald Trump will follow through with pledges to cut taxes and increase government spending.

The IMF raised Japan’s 2017 projection to 1.2 per cent, while China saw a 0.1 percentage point growth forecast increase to 1.7 per cent.