{ "title": "World Economic Outlook Update, January 2018: Brighter Prospects, Optimistic Markets, Challenges Ahead", "publication": "World Economic Outlook, January 2018", "sourceUrl": "https://www.imf.org/en/publications/weo/issues/2018/01/11/world-economic-outlook-update-january-2018", "canonical": "https://www.imf.org/en/publications/weo/issues/2018/01/11/world-economic-outlook-update-january-2018", "overlayPath": "/en/publications/weo/issues/2018/01/11/world-economic-outlook-update-january-2018/index.md", "summary": "Global economic activity continues to strengthen. The pickup in growth has been broad based, with notable upside surprises in Europe and Asia. Global growth forecasts for 2018 and 2019 have been revised upward by to 3.", "publishDate": "2018-01-11", "sections": [ { "heading": "Global outlook and growth revisions", "content": "- Global output is estimated to have grown by 3.7 percent in 2017 (0.1 percentage point faster than projected in the fall and ½ percentage point higher than in 2016).\n- Global growth forecasts for 2018 and 2019 have been revised up by 0.2 percentage point to 3.9 percent for both years.\n- The upward revision reflects increased global growth momentum and the expected impact of the recently approved U.S. tax policy changes.\n- The cyclical upswing since mid-2016: about 120 economies (accounting for three quarters of world GDP) saw a pickup in year-on-year growth in 2017 — the broadest synchronized global growth upsurge since 2010." }, { "heading": "United States: tax policy effects and forecasts", "content": "- The U.S. tax policy changes are expected to stimulate activity, with investment response to corporate income tax cuts driving the short-term impact.\n- The effect on U.S. growth is estimated to be positive through 2020, cumulating to 1.2 percent through that year, with a range of uncertainty around this central scenario.\n- Because some provisions are temporary, the package is projected to lower growth for a few years from 2022 onwards.\n- U.S. real GDP is projected to be 1.2 percent higher by 2020 than in a projection without the tax policy changes.\n- U.S. growth forecasts revised:\n - 2018: raised from 2.3 percent to 2.7 percent.\n - 2019: raised from 1.9 percent to 2.5 percent.\n- The forecast assumes the decline in tax revenues will not be offset by spending cuts in the near term; stronger domestic demand is projected to increase imports and widen the current account deficit." }, { "heading": "Regional and sectoral highlights", "content": "- Advanced economies: upward revisions mean growth is now expected to exceed 2 percent in 2018 and 2019.\n- Emerging and developing Asia: expected to grow at around 6.5 percent over 2018–19, broadly the same pace as in 2017; region accounts for over half of world growth.\n- Emerging and developing Europe: 2017 growth now estimated to have exceeded 5 percent; activity in 2018 and 2019 projected to remain stronger than previously anticipated.\n- Latin America and the Caribbean: growth of 1.9 percent in 2018 (as projected in the fall) and 2.6 percent in 2019 (a 0.2 percentage point upward revision).\n- Middle East, North Africa, Afghanistan, and Pakistan: growth subdued at around 3½ percent in 2018 and 2019.\n- Sub-Saharan Africa: growth from 2.7 percent in 2017 to 3.3 percent in 2018 and 3.5 percent in 2019; South Africa expected to remain below 1 percent in 2018–19.\n- Commonwealth of Independent States: growth this year and next projected to remain above 2 percent." }, { "heading": "Commodities, inflation, and financial markets", "content": "- Crude oil:\n - Prices rose by about 20 percent between August 2017 and mid-December 2017, to over $60 per barrel, with some further increase as of early January 2018.\n - Markets expect prices to gradually decline over the next 4–5 years; as of mid-December, medium-term price futures stood at about $54 per barrel.\n - Table memo: The average price of oil in U.S. dollars a barrel was $52.7 in 2017; the assumed price based on futures markets (as of December 11, 2017) is $59.9 in 2018 and $56.4 in 2019.\n- Inflation:\n - Increase in fuel prices raised headline inflation in advanced economies, but wage and core-price inflation remain weak.\n - Emerging market economies: headline and core inflation have ticked up slightly in recent months after declining earlier in 2017.\n- Bond and equity markets:\n - Market expectations for the U.S. Federal Reserve policy path have shifted up since August, but still price in a gradual increase over 2018 and 2019.\n - Yield curves have tended to flatten as short-term rates have risen more than longer-term rates in several advanced economies.\n - Equity prices in advanced economies continued to rally; emerging market equity indices have risen further since August.\n- Exchange rates (as of early January 2018):\n - U.S. dollar and euro: close to their August 2017 level in real effective terms.\n - Japanese yen: depreciated by 5 percent.\n - Sterling: appreciated by close to 4 percent.\n - Renminbi: appreciated by around 2 percent.\n - Malaysian ringgit: rebounded by about 7 percent.\n - South African rand: by close to 6 percent.\n - Mexican peso: depreciated by 7 percent.\n - Turkish lira: depreciated by 4.5 percent.\n- Capital flows: capital flows to emerging economies remained resilient through Q3 2017, with continued strength in non-resident portfolio inflows." }, { "heading": "Risks and scenarios", "content": "- Near-term risks broadly balanced; medium-term risks skewed to the downside.\n- Upside scenario: cyclical rebound proves stronger if pickup in activity and easier financial conditions reinforce each other.\n- Downside scenarios and triggers:\n - Financial market correction due to rich asset valuations and very compressed term premiums.\n - Faster-than-expected increase in advanced economy core inflation and interest rates.\n - Tighter global financing terms affecting economies with high gross debt refinancing needs and unhedged dollar liabilities.\n - More modest-than-expected U.S. investment response to tax changes, weakening spillovers to trading partners.\n - Buildup of financial vulnerabilities if easy financial conditions persist, incl. increased exposure to lower-rated borrowers and rapid growth of non‑financial corporate debt in some emerging markets.\n - Inward-looking policies, increases in trade barriers, geopolitical tensions, political uncertainty, extreme weather events, and migration pressures." }, { "heading": "Policy priorities and recommendations", "content": "- Shared priorities across economies:\n - Implement structural reforms to boost potential output and make growth more inclusive.\n - Ensure financial resilience through proactive financial regulation and, where needed, balance sheet repair and stronger fiscal buffers.\n- Advanced economies:\n - Adopt a cautious, data-dependent monetary policy normalization where output is close to potential and wage/price pressures are muted.\n - Fiscal policy should focus on medium-term objectives: public investment to boost potential output, raise labor force participation, ensure public debt sustainability, and reduce excessive external imbalances.\n - Where fiscal consolidation is needed, calibrate pace to avoid sharp drags on growth and orient spending to health, education, and protecting the vulnerable.\n- Emerging market economies:\n - Use improved monetary policy frameworks to lower core inflation and support demand if activity weakens.\n - Gradually rebuild fiscal buffers, especially in commodity-dependent economies; avoid deferring reforms and adjustments.\n - Employ exchange rate flexibility to prevent sustained relative-price misalignments and limit buildup of financial and external imbalances.\n- Low-income countries:\n - Support near-term activity while diversifying economies and lifting potential output to sustain progress toward Sustainable Development Goals.\n - Build buffers to enhance resilience; tackle high and rising debt levels.\n - Focus policy on broadening the tax base, mobilizing revenue, improving debt management, reducing poorly targeted subsidies, and channeling spending into infrastructure, health, and education.\n - Strengthen macroprudential frameworks and increase exchange rate flexibility where appropriate.\n- Multilateral cooperation priorities:\n - Continue financial regulatory reform; avoid competitive races to the bottom in taxes, labor, and environmental standards.\n - Modernize rules-based multilateral trade framework; strengthen the global financial safety net.\n - Preserve correspondent banking relationships; curb cross-border money laundering, organized crime, and terrorism.\n - Mitigate and adapt to climate change." }, { "heading": "Key statistics from the projections table (selected)", "content": "- World Output (percent change):\n - 2016: 3.2\n - 2017: 3.7\n - 2018: 3.9\n - 2019: 3.9\n - Difference from October 2017 WEO Projections: 0.2\n- Emerging and Developing Asia: 6.4 (2016) to 6.5 (2017) and about 6.6–6.8 (projections).\n- India (fiscal year basis): 7.1 (2016), 7.4 (2017), 7.8 and 7.9 (projections).\n- World trade volume (goods and services): recent entries include 4.6, 4.1, 4.3, 4.2 (selected series).\n- Commodity prices (U.S. dollars) — oil:\n - 2016 change: –15.7\n - 2017 change: 23.1\n - Table memo: oil price average $52.7 in 2017; assumed $59.9 in 2018; $56.4 in 2019.\n\nWorld Economic Outlook Update, January 2018: Brighter Prospects, Optimistic Markets, Challenges Ahead\n\n---\n\n Content in this bundle\n\n- 0118\n - 0118 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - 0118 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- Blog: The Current Economic Sweet Spot Is Not the “New Normal”\n- Opening Remarks by Christine Lagarde\n- https://www.imf.org/en/about/infographics/world-economic-outlook-update-january-2018-infographic\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/publications/weo/issues/2018/01/11/world-economic-outlook-update-january-2018" } ], "bullets": [ "[Markdown version](/en/publications/weo/issues/2018/01/11/world-economic-outlook-update-january-2018/index.md)", "[Structured JSON version](/en/publications/weo/issues/2018/01/11/world-economic-outlook-update-january-2018/index.json)", "[Bundle manifest](/en/publications/weo/issues/2018/01/11/world-economic-outlook-update-january-2018/bundle-manifest.json)", "Published: January 11, 2018", "Global output is estimated to have grown by 3.7 percent in 2017 (0.1 percentage point faster than projected in the fall and ½ percentage point higher than in 2016).", "Global growth forecasts for 2018 and 2019 have been revised up by 0.2 percentage point to 3.9 percent for both years.", "The upward revision reflects increased global growth momentum and the expected impact of the recently approved U.S. tax policy changes.", "The cyclical upswing since mid-2016: about 120 economies (accounting for three quarters of world GDP) saw a pickup in year-on-year growth in 2017 — the broadest synchronized global growth upsurge since 2010.", "The U.S. tax policy changes are expected to stimulate activity, with investment response to corporate income tax cuts driving the short-term impact.", "The effect on U.S. growth is estimated to be positive through 2020, cumulating to 1.2 percent through that year, with a range of uncertainty around this central scenario.", "Because some provisions are temporary, the package is projected to lower growth for a few years from 2022 onwards.", "U.S. real GDP is projected to be 1.2 percent higher by 2020 than in a projection without the tax policy changes.", "U.S. growth forecasts revised:", "The forecast assumes the decline in tax revenues will not be offset by spending cuts in the near term; stronger domestic demand is projected to increase imports and widen the current account deficit.", "Advanced economies: upward revisions mean growth is now expected to exceed 2 percent in 2018 and 2019.", "Emerging and developing Asia: expected to grow at around 6.5 percent over 2018–19, broadly the same pace as in 2017; region accounts for over half of world growth.", "Emerging and developing Europe: 2017 growth now estimated to have exceeded 5 percent; activity in 2018 and 2019 projected to remain stronger than previously anticipated.", "Latin America and the Caribbean: growth of 1.9 percent in 2018 (as projected in the fall) and 2.6 percent in 2019 (a 0.2 percentage point upward revision).", "Middle East, North Africa, Afghanistan, and Pakistan: growth subdued at around 3½ percent in 2018 and 2019.", "Sub-Saharan Africa: growth from 2.7 percent in 2017 to 3.3 percent in 2018 and 3.5 percent in 2019; South Africa expected to remain below 1 percent in 2018–19.", "Commonwealth of Independent States: growth this year and next projected to remain above 2 percent.", "Crude oil:", "Inflation:", "Bond and equity markets:", "Exchange rates (as of early January 2018):", "Capital flows: capital flows to emerging economies remained resilient through Q3 2017, with continued strength in non-resident portfolio inflows.", "Near-term risks broadly balanced; medium-term risks skewed to the downside.", "Upside scenario: cyclical rebound proves stronger if pickup in activity and easier financial conditions reinforce each other.", "Downside scenarios and triggers:", "Shared priorities across economies:", "Advanced economies:", "Emerging market economies:", "Low-income countries:", "Multilateral cooperation priorities:", "World Output (percent change):", "Emerging and Developing Asia: 6.4 (2016) to 6.5 (2017) and about 6.6–6.8 (projections).", "India (fiscal year basis): 7.1 (2016), 7.4 (2017), 7.8 and 7.9 (projections).", "World trade volume (goods and services): recent entries include 4.6, 4.1, 4.3, 4.2 (selected series).", "Commodity prices (U.S. dollars) — oil:", "**0118**", "[Blog: The Current Economic Sweet Spot Is Not the “New Normal”](https://blogs.imf.org/2018/01/22/the-current-economic-sweet-spot-is-not-the-new-normal/)", "[Opening Remarks by Christine Lagarde](http://www.imf.org/en/News/Articles/2018/01/22/sp012218-opening-remarks-for-the-world-economic-outlook-update-press-conference)", "[https://www.imf.org/en/about/infographics/world-economic-outlook-update-january-2018-infographic](https://www.imf.org/en/about/infographics/world-economic-outlook-update-january-2018-infographic)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "related": [ { "title": "0118", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/weo/2018/update/january/0118.pdf", "summary": { "path": "/-/media/files/publications/weo/2018/update/january/0118.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/weo/2018/update/january/0118.pdf", "mime": "application/pdf" } } ], "alternates": { "markdown": "/en/publications/weo/issues/2018/01/11/world-economic-outlook-update-january-2018/index.md", "json": "/en/publications/weo/issues/2018/01/11/world-economic-outlook-update-january-2018/index.json", "bundleManifest": "/en/publications/weo/issues/2018/01/11/world-economic-outlook-update-january-2018/bundle-manifest.json" }, "generatedAtUtc": "2026-09-27T18:16:04.681Z" }