The International Monetary Fund (IMF) said that advanced economies should rely on their monetary, fiscal and structural tools to lift growth prospects while adjusting their growth forecasts.
In its latest World Economic Outlook, the IMF forecasts a global growth of 3.1 per cent in 2016, with a slight increase to 3.4 per cent next year. IMF chief economist Maurice Obstfeld said: “Taken as a whole, the world economy has moved sideways”.
Global economic growth will remain subdued this year after the Brexit vote and a slowdown in the US. Growth estimates for advanced economies for this year were trimmed to 1.6 per cent from 1.8 per cent. Projections for next year were kept at 1.8 per cent. The IMF said that to support growth in the short term, central banks in advanced economies should maintain lax monetary policies.
In the meantime, final data from IHS Markit showed that the eurozone’s private sector activity fell to a 20-month low in September, indicating that growth has slowed to its lowest levels as growth eased in Germany, Italy and Spain. The final composite output index fell from 52.9 in August to 52.6 in September, in line with expectations. The September reading was above the preliminary score of 52.1.
According to Chris Williamson, chief business economist at IHS Markit, “The slowing rate of growth across the region in part reflects growing caution among businesses in terms of their spending due to worries about the economic outlook, linked in many cases to political uncertainty.”
Finally in the UK, the service sector increased for the second straight month in September, though at a marginally lower rate than that recorded for August. The UK Purchasing Manager’s Index fell from 52.9 in August to 52.6 in September. A reading above 50 shows expansion in the sector.
According to data from IHS Markit, the UK service sector continued to recover from July’s EU referendum-induced shock. New business grew at the highest rate since February while the rate of job creation rose at the highest rate since April.
This report was compiled by Bank of Valletta for general information purposes only.