International Monetary Fund (IMF) on Tuesday said that the global economy is showing more positive momentum, but warned that inward-looking policies and sharp tightening in global financial conditions could threaten the growth momentum.
“Near-term global growth is expected to pick up, reflecting a firming-up of activity in advanced economies, an anticipated shift in the macroeconomic policy mix in the United States, and stabilization in stressed emerging economies,” said the IMF in its G20 surveillance note released ahead of the G20 finance ministers and central bank governors' meetings on March 17 and 18 in Germany.
Outlook has improved in advanced economies, although their growth prospects in the medium-term remain subdued. They will continue to suffer from global financial crisis legacies, such as high corporate debts and low productivity growth, said the IMF.
Emerging economies remain the main driver of the strengthening global outlook, as they continue to contribute more than three-quarters of total global GDP growth in 2017.
According to IMF's World Economic Outlook report released in January, the global economy is expected to grow 3.4 percent in 2017 and 3.6 percent in 2018, up from 3.1 percent in 2016.
Christine Lagarde, managing director of the IMF, said Tuesday in an IMF blog that the global economy has reached a turning point at least for now.
The IMF also warned of the risks of inward-looking policies which could disrupt global trade and a sharp tightening in global financial conditions.
A stronger U.S. dollar and rising U.S. interest rates could lead to a sharper-than-expected tightening in global financial conditions, which could potentially put stress on some emerging economies and low-income countries, said Lagarde.
In order to sustain the growth momentum, IMF called on G20 members to uphold rules-oriented open multilateral trade framework, complete international financial regulatory reform and strengthen the international financial architecture.
Lagarde also called for measures to boost inclusive growth, including training lower-skilled workers and retooling of income policies and tax systems.