The world economy is improving. The question is how strong and long-lasting this improvement will be. The recovery could disappoint, last for a time or mark the beginning of a period of rapid and sustained growth. The last seems the least likely outcome. But failure is not predestined.
The International Monetary Fund’s World Economic Outlook lays out the issues. It had expected the economy to improve and it may be doing so. Last year, the world economy grew 3.1 per cent (at purchasing power parity). The IMF now forecasts growth will be 3.5 per cent in 2017 and 3.6 per cent in 2018. These forecasts are more or less identical to those published last October. As the WEO notes, even global trade is strengthening. Yet this upswing has to be put in context: it comes after many years of downgrades to the forecasts. The future looks far worse than it did just a few years ago.
The most important reason for the recovery is that three successive shocks — the financial crisis of 2007-09, the eurozone crisis of 2009-13 and the commodity price falls of 2014-15 — are moving well into the past. Most affected economies are enjoying cyclical recoveries: indeed, all regions and most significant economies are forecast to enjoy some growth. As these shocks fade, confidence has returned. Financial crises, in particular, have long-lasting effects. But even these do not last for ever. Strongly supportive monetary policies have also helped. We may at last be seeing the end of the post-crisis malaise.