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Global divergences

March 22, 2015

 Abstract: The January 2015 update of the IMF’s quarterly ‘World Economic Outlook’ indicates improved prospects for the global economy. The forecast for 2015 and 2016 is that the world GDP growth would accelerate slightly, while the growth in global trade would pick up significant momentum. Persistence of soft commodity prices (including oil) has also been predicted, which is encouraging.

But, at the individual country and region level, significant divergence in GDP growth has been forecast, which may entail some risks and challenges in the areas of domestic policy, international trade, global capital flows and international cooperation. For example, slow growing economies may come under protectionist pressures, while fast growing countries may face challenges in exchange rate management because of the surge in capital inflows. Similarly, uneven economic prospects across major economies may hinder consensus building among nations, which is imperative for a number of ‘global public goods’.

Keywords: outlook; divergence; world trade; international cooperation; capital flows; protectionism; exchange rate management; global public goods; forecast; consensus; GDP growth

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