IMF raises global economic outlook as developed economies grow

 The International Monetary Fund has raised its forecast for global growth this year as expansions in the U.S. and U.K. accelerate, and urged advanced economies to maintain monetary accommodation to strengthen the recovery.

The global economy will grow 3.7 per cent this year, compared with an October estimate of 3.6 per cent, the IMF said in revisions to its World Economic Outlook released in Washington today. U.S. gross domestic product will expand 2.8 percent, compared with 2.6 percent; Japan will gain 1.7 percent versus 1.2 percent; and the U.K. will increase 2.4 percent from 1.9 percent, the report showed.

“In advanced economies, output gaps generally remain large and, given the risks, the monetary policy stance should stay accommodative while fiscal consolidation continues,” the Washington-based organization said in the report. “In many emerging market and developing economies, stronger external demand from advanced economies will lift growth, although domestic weaknesses remain a concern.”

China, the world’s second-largest economy, is projected to grow 7.5 percent, faster than the 7.3 percent seen in October, after 7.7 percent last year, according to the report.

Central banks in the U.S., Japan and the euro area face inflation levels under their targets while trying to accelerate growth with policies including benchmark interest rates near zero and bond-buying programs. The Federal Reserve announced plans last month to taper monthly asset purchases to $75 billion from $85 billion, citing improvement in the labor market.

Olivier Blanchard, the IMF’s chief economist, said in a prepared statement that the fund expects the Fed’s benchmark interest rate will rise in 2015.

Among the new risks to advanced economies, the IMF cited “very low inflation,” particularly in the euro area, as becoming more significant and raising the prospect that longer-term inflation expectations could head lower.