International Monetary Fund sees solid near-term global growth but risks beyond

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The International Monetary Fund gave an optimistic opinion on New Zealand's economic outlook, with the pace of growth seen staying around 3 percent, and says the strong Crown books offer enough headroom to meet the needs of an expanding population. This year's unemployment has been forecast at 3.0 percent up from 2.9 last year with an outlook for 3.2 percent in 2019.

Obstfeld added that the Trump administration trade initiatives would do little to reduce the overall US trade and current account deficits, as these have more to do with USA spending exceeding income.

However, the bank said that if reforms are delayed, growth could drop below current levels in an uncertain macroeconomic environment as financing risks rapidly increase and GDP growth could slow to 2 percent.

The IMF's report is otherwise broadly positive: economic growth to remain around 3 per cent in the near term, risks broadly balanced.

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The worldwide lender released its World Economic Outlook report in Washington DC on Tuesday, ahead of the IMF/World Bank Group Spring Meetings.

IMF Chief Economist Maurice Obstfeld stressed that the trade conflict could damage the global economy if it broadens to affect other countries, and said even the prospect of a trade war could do harm.

But trade tensions, such as the United States and China's recent dueling tariff announcements, could take a direct toll on trade and economic activity and also cause financial market turmoil that would tighten financial conditions and hurt confidence.

The recent intensification of trade tensions started in early March with the US' announcement of its intent to levy steel and aluminum tariffs for national security reasons, he said, adding that the announcement has fed into several bilateral negotiations aimed at reducing USA trade deficits with individual trading partners.

The US economy is forecast to grow by 2.9%, up 0.6% from the previous forecast.

U.S. President Donald Trump's tax cuts at the end of 2017 and the plans this year to boost federal spending by hundreds of millions of dollars are responsible for half of the upgrade in the fund's outlook for this year and next.

However, Obstfeld warned the stimulus was "largely temporary". The IMF predicts oil prices will average about US$62 a barrel in 2018, compared with an estimate of about US$52 a barrel in October. This is the highest share of countries experiencing a year-over-year growth pickup since 2010.

It forecasts the Irish economy to grow at 4.5% this year and 4% next year.

While the medium term looks good, the International Monetary Fund warns countries to get ready for a slowdown in the early 2020's, advising countries to introduce structural reforms and fiscal policies that raise productivity and enhance inclusiveness.

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