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The report highlighted the precarious nature of the recovery eight years after the global financial crisis. It raised the specter that persistent stagnation, particularly in advanced economies, could further fuel populist calls for restrictions on trade and immigration. Obstfeld said such restrictions would hamper productivity, growth, and innovation.
“It is vitally important to defend the prospects for increasing trade integration,’’ Obstfeld, said. “Turning back the clock on trade can only deepen and prolong the world economy’s current doldrums.”
To support growth in the near term, the central banks in advanced economies should maintain easy monetary policies, the IMF said. But monetary policy alone won’t restore vigor to economies dogged by slowing productivity growth and aging populations, according to the new report. Where possible, governments should spend more on education, technology, and infrastructure to expand productive capacity while taking steps to alleviate inequality. Many countries also need to counteract waning potential growth through structural reforms to boost labor force participation, better match skills to jobs, and reduce barriers to market entry. [...]
Uncertainty following the “Brexit’’ referendum in June will take a toll on the confidence of investors. U.K. growth is predicted to slow to 1.8 percent this year and to 1.1 percent in 2017, down from 2.2 percent last year.
The euro area will expand 1.7 percent this year and 1.5 percent next year, compared with 2 percent growth in 2015.
“The European Central Bank should maintain its current appropriately accommodative stance,” the IMF said. “Additional easing through expanded asset purchases may be needed if inflation fails to pick up.” [...]
Full October 2016 World Economic Outlook