On Tuesday (21/01), the International Monetary Fund (IMF) sent a positive message to the world as it slightly raised its forecast for global economic growth in 2014. The main reason for this upward revision is the improving economy of the USA. According to the IMF, the US economy will grow 2.8 percent in 2014 (0.2 percentage points higher than the IMF's previous outlook released in October 2013). Due to stronger US growth, the global economy is now expected to expand by 3.7 percent (0.1 percent up from its previous forecast).
IMF chief economist Olivier Blanchard stated that "the basic reason behind the stronger recovery is that the brakes to the recovery are progressively being loosened. Uncertainty is decreasing." As such, countries move away from austerity budgets and financial systems improve.
The IMF's upward revision is positive as the institution needed to downgrade its forecast for global economic growth on several occasions in the past two years. But although its stance on economic recovery of the USA is positive, the IMF still detects weak growth in Europe (particularly in the southern European countries).
For now, the IMF believes that global economic recovery will continue into 2015. In that year, economic growth is estimated to reach 3.9 percent with most of the gains originating from advanced countries as emerging economies - which were the engine of global economic growth in the crisis years - need to experience a period of restructuring due to capital outflows.
Two concerns of the IMF are low inflation (or deflation) in the advanced economies of Europe, USA and Japan, as well as high unemployment rates.
IMF's GDP Growth Outlook: