WASHINGTON – The International Monetary Fund upgraded its economic outlooks for the world and Japan in 2014 on the back of an overall recovery in advanced economies.
In a revision to its biannual World Economic Outlook report, the IMF on Tuesday raised the expected growth rate of the global economy to 3.7 percent in 2014 from 3.6 percent in its last projection released in October, compared with 3 percent growth in 2013.
“Activity is expected to improve further in 2014-2015, largely on account of recovery in the advanced economies,” the IMF said.
The Washington-based organization said advanced economies as a whole will grow 2.2 percent in 2014, up from the earlier forecast of 2 percent, compared with a 1.3 percent expansion in 2013.
On Japan, the IMF said that the temporary fiscal stimulus being pushed by Prime Minister Shinzo Abe’s government “should partly offset the drag from the consumption tax increase” to 8 percent from the current 5 percent in April.
“As a result, annual growth is expected to remain broadly unchanged at 1.7 percent in 2014” compared with 2013, it said, raising its October projection by 0.4 percentage point.
The IMF forecast, however, that Japanese growth will slow to 1 percent in 2015 while the growth rates of the world economy will rise to 3.9 percent and overall advanced economies to 2.3 percent.
The IMF said downside risks remain, citing weak demand and “very low inflation” in advanced countries, especially in the eurozone.
“It will be critical to avoid a premature withdrawal of monetary policy accommodation, including in the United States,” where the Federal Reserve said last month it will scale back its stimulus, the IMF said.
The U.S. economy will grow 2.8 percent in 2014, up from the earlier projection of 2.6 percent, compared with a 1.9 percent expansion in 2013. For the eurozone, which suffered contractions in 2012 and 2013, the IMF forecast 1 percent growth in 2014.
In emerging economies, stronger demand from advanced economies will lift growth but domestic weaknesses remain a concern, the IMF said, projecting unchanged 5.1 percent growth in 2014, compared with a 4.7 percent expansion in 2013.
“Portfolio shifts and capital outflows are likely” in emerging economies after the U.S central bank’s unwinding of its quantitative-easing asset purchases, it said.
The Chinese economy will grow 7.5 percent in 2014, up 0.3 point from the earlier forecast, and the Indian economy will expand 5.4 percent, up 0.2 point from the October projection, according to the IMF.