WASHINGTON—The global economy is strengthening with the United States leading the way but there are still bumps within the recovery, said International Monetary Fund Economic Counselor Olivier Blanchard at the World Economic Outlook press conference Tuesday.
“Brakes are loosened at different paces however, and the recovery remains uneven,” Blanchard said.
The IMF forecast world growth to be 3.6 percent in 2014 and 3.9 percent in 2015, up 3 percent from 2013.
In advanced economies, the forecast growth is 2.2 percent in 2014, up 1.3 percent from a year ago. Advanced economies are developed countries with high levels of gross domestic product, such as the United States, Canada, some European countries and Japan.
Emerging and developing economies, like China and India, also are seeing strong growth, and the IMF forecast their growth to reach 4.9 percent in 2014, up from 4.7 percent in 2013.
Jim Kaplan, who follows economic trends at Quarles & Brady LLC, said many people would continue to be impacted by the slow growth in the U.S.
“It is going to be very difficult for Americans in terms of employment, income, ability to retire, ability to send your kids to college and for all the things we care about, the sub 3 percent is not going to a positive,” Kaplan said. “People are not going to be happy except people who invest in stock market. For the big companies that most investors invest in, it’s not so bad. Large cap growth companies are best able to defend themselves in a slow growth environment. They can borrow money more freely.”
While such investors might have better luck from the slow growth, what’s needed for the general economy is political consensus that would lead to investments in infrastructure programs, increase the minimum wage and restore domestic discretionary spending because fiscal consolidation makes growth slower, Kaplan added.
IMF experts were concerned about growth potential. As both advanced and emerging market economies continue to see slow growth, the potential to grow further is held back by the fact that they’ve already grown so much.
“In some countries, such as China, lower growth may be in part a desirable byproduct of more balanced growth,” Blanchard said. “In others, there is clearly scope for some structural reforms to improve the outcome. This is bad on its own, but it also makes fiscal adjustment more difficult.”
The U.S., which has the strongest growth, is forecast to be 2.8 percent in 2014. As for other major economies, the IMF forecast growth to be 2.9 percent in the UK and 1.7 percent in Germany. In Japan, 1.4 percent growth is estimated with the Bank of Japan’s fiscal stimulus plan called Abeonomics.
Experts gathered to discuss and answer questions about the World Economic Outlook at the IMF press briefing Tuesday, April 8.