WASHINGTON – The International Monetary Fund on Tuesday forecast Japan’s economy will grow 1.5 percent this year, up 0.2 percentage point from its estimate in July, as the “broad-based” global recovery has gathered steam.
In its latest World Economic Outlook, the IMF raised its global growth projection by 0.1 point to 3.6 percent in 2017 and by 0.1 point to 3.7 percent in 2018.
“The global recovery is continuing, and at a faster pace,” IMF chief economist Maurice Obstfeld said. “We see an accelerating cyclical upswing boosting Europe, China, Japan and the United States, as well as emerging Asia.”
“The current global acceleration is also notable because it is broad-based — more so than at any time since the start of this decade,” Obstfeld said at a news conference.
The 2018 growth estimate for Japan was revised up 0.1 point to 0.7 percent. The deceleration from 2017 partly reflects the assumption that personal spending growth will moderate, and that the boost from 2020 Olympics-related private investment will be offset by higher imports and slower projected growth in foreign demand.
“Over the medium term, a shrinking Japanese labor force will curtail GDP (gross domestic product) growth although, in per capita income terms, Japan’s growth is projected to remain close to recent averages,” the IMF said.
The Washington-based institution raised its projection for U.S. growth by 0.1 point from July to 2.2 percent this year and by 0.2 point to 2.3 percent next year, citing supportive financial conditions and strong business and consumer confidence.
But the forecast does not take into account a fiscal stimulus from planned tax cuts that President Donald Trump and congressional Republican leaders aim to pass into law this year, the IMF said, citing uncertainty about the legislation process.
China’s growth estimate was lifted by 0.1 point to 6.8 percent in 2017 and by 0.1 point to 6.5 percent in 2018, an upgrading that reflects an expectation that the government will maintain an expansionary policy mix to meet its target of doubling real GDP between 2010 and 2020.
The growth forecast for the 19-nation eurozone was revised up 0.2 point to 2.1 percent this year and 0.2 point to 1.9 percent next year. The increase in growth in 2017 mostly reflects an acceleration in exports and continued strength in domestic-demand growth.
The estimate for Association of Southeast Asian Nations members — Indonesia, Malaysia, the Philippines, Thailand and Vietnam — was up 0.1 point to 5.2 percent in 2017 and unchanged from July 2018.
“These positive developments give good cause for greater confidence,” the IMF said. “But neither policymakers nor markets should be lulled into complacency.”
In particular, the IMF cited geopolitical tensions such as the rising nuclear threat posed by North Korea and faster-than-expected monetary tightening in the United States and Europe as risk factors that could affect an otherwise sound outlook for the world economy.
“A faster-than-anticipated tightening of global financial conditions or a shift toward protectionism in advanced economies could exacerbate capital outflow pressures on emerging markets,” it said.
At the same time, the IMF said the cyclical pickup in global economic activity provides “an ideal window of opportunity” for countries to undertake reforms aimed at boosting productivity and building resilience against downside risks.