The International Monetary Fund on Tuesday cut its forecast for economic growth in the U.S. and other advanced economies while citing increasing risks from isolationist sentiment, but upgraded its outlook for emerging markets.
As a result of the offsetting dynamics, the IMF left its global growth estimate unchanged from its July projection at 3.1% this year and 3.4% in 2017 and renewed its call for more forceful government action to fuel economic activity.
“Taken as a whole, the world economy is moving sideways,” IMF Economic Counselor Maurice Obstfeld said at a news conference at the annual meetings of the IMF and World Bank in Washington, D.C. “Without determined policy action to support economic activity over the short and longer terms, subpar growth at recent levels risks feeding on itself through the negative economic and implicit forces it is unleashing.”
In the U.S., the IMF lowered its growth estimate to 1.6% this year and 2.2% in 2017, down from 2.2% and 2.5%, respectively, in July. The agency cited weaker-than-expected growth of 1.1% at an annual rate in the second quarter as continued sluggish business investment and stockpiling offset solid consumption. The fund traced the soft capital spending to the energy sector downturn, the negative effects of a strong dollar on exports and “possibly also the financial market volatility and recession fears of late 2015 and early 2016.”