The International Monetary Fund downgraded growth outlooks for the U.S. and U.K. amid concerns over fiscal policy and economic activity, but said global growth is on a firmer footing.
The World Economic Outlook Update for July revised April growth outlooks for countries and regions across the world. The IMF said global growth is set for 3.5% this year and 3.6% in 2018, unchanged from April.
"There is now no question marks over the world economy's gain in momentum," said Maurice Obstfeld, economic counselor and director of research at the IMF, at a news conference on the update. "However, the distribution of this growth around the world has changed," with some economies "up, some down" compared with April.
Mr. Obstfeld said good news was found in growth projections in the eurozone, where the IMF revised growth projections upward for 2017 by 0.2 percentage points to 1.9%, and by 0.1 percentage points to 1.7% for 2018.
The forecast for growth in Japan in 2017 was revised upward to 1.3%, from 1.2%; and was flat at 0.6% for 2018. For Canada, the IMF said the growth forecast had been upgraded for 2017 by 0.6 percentage points to 2.5%; but revised the 2018 forecast downward by 0.1 percentage points to 1.9%.
However, "from a global growth perspective, the most important downgrade is the United States. Over the next two years U.S. growth should remain above its longer-term potential growth rate, but we have reduced our forecasts for both 2017 and 2018 … because near-term U.S. fiscal policy looks less likely to be expansionary now than we believed would be the case in the spring," said Mr. Obstfeld.
The IMF projected U.S. growth for 2017 to be 2.1%, down from 2.3%; and said 2018 would see 2.1% growth, down from the 2.5% forecast in April. "Even this 2.1% growth pace is still well above the lackluster 2016 US outcome, which was 1.6%," he added.
The IMF's projection for the U.K. was lowered for 2017, by 0.3 percentage points to 1.7%, "based on the economy's tepid performance so far in 2017." The projection was flat for 2018 at 1.5%.
"Overall though, recent data point to the broadest synchronized upswing the world economy has experienced in the last decade, and that's good news," said Mr. Obstfeld.
The July update is available on the IMF website.