The global economy is gaining momentum which should be good news for Australia’s commodities-based economy.
But the International Monetary Fund has again raised concerns about a growing shift towards trade protectionism and a breakdown of international economic collaboration which took root after the second world war.
In its latest world economic outlook released In Washington overnight, the IMF has raised its global growth forecast for 2017 to 3.5% after expanding by 3.1% last year.
Australian growth is predicted to rise to 3.1% this year after 2.5% in 2016, which should see the unemployment rate shrink to 5.2% from 5.9% now.
The IMF says commodity-exporting economies such as Australia are set to recover, especially given the average 20% increase in coal prices.
“The acceleration in activity will be supported by accommodative monetary policies, supportive fiscal policies or infrastructure investment, improving sentiment following the upturn in commodity prices, and less drag from declining investment in the commodity sector,” it says in the report.
But IMF economic counsellor Maurice Obstfeld said while there is a chance economic growth will exceed expectations, significant downside risks continue to cloud the medium-term outlook.
“One salient threat is a turn toward protectionism, leading to trade warfare,” he says.
“The global economy seems to be gaining momentum – we could be at a turning point – but even as things look up, the postwar system of international economic relations is under severe strain despite the aggregate benefits it has delivered.”
