The International Monetary Fund (IMF) is warning that emerging protectionism could derail the recent uptick in the global economy. Despite that concern, the organization has raised its economic forecast for global growth in 2017 to 3.5 percent.
In a report released on Tuesday and noting strong consumer and business confidence, it also maintained its 3.6 percent outlook for 2018.
"Acceleration will be broad-based across advanced, emerging and low-income economies, building on gains that we have seen on both manufacturing and trade," said Maurice Obstfeld, the IMF's director of research, at a press conference in Washington DC.
As for the United States, the IMF forecast a growth rate of 2.3 percent in 2017 and 2.5 percent in 2018, assuming the U.S. Congress passes tax stimulus and reform legislation. The Fund's economists are worried that a sharper increase in the value of the dollar could hurt emerging market countries at a time when some are still recovering from the commodity downturn. It is also warning about protectionist policies in the United States and Europe.
"A broad withdrawal from multilateralism could lead to such self-inflicted wounds as widespread protectionism or a competitive race to the bottom in financial oversight. A struggle of each against all that will leave all countries worse off," Obstfeld said.
The IMF is positive about China's economic development over the next two years: 6.6 percent in 2017 and 6.2 percent in 2018. But the organization is concerned that elevated debt levels in China may have longer-term implications over the country's economy.
"[China's] desirable rebalancing process continues, as seen in a declining current account surplus and an increasing GDP share of services. Yet growth has remained reliant on domestic credit expansion so rapid that it may cause financial stability problems down the road," according to Obstfeld.
The IMF said it is urging political leaders to invest in better education and workforce training programs in order to ensure that the clear benefits of global trade be more broadly distributed and effectively utilized.