International Monetary Fund boosts growth forecast for U.S.

As per new International Monetary Fund projections, India’s growth in 2016 is now estimated to be 6.6pc against 7.6pc forecast earlier.

Emerging-market and developing economies are estimated to grow at 4.1% in 2016, increasing to 4.5% in 2017.

Economists are already on alert given that barriers to trade have surged in recent years while cross-border sales have slumped amid weak global demand. General improvement got under way around mid-year.

Reflecting the pick-up in global growth and commodity prices, exports are also expected to recover, Peiris noted. This projection is consistent with the steepening US yield curve, the rise in equity prices, and the sizable appreciation of the USA dollar since the November 8 election.

Stronger economic data and the promise of policy changes have lifted long-term interest rates and spurred US stock markets toward near historic highs in recent months.

However, the International Monetary Fund report is cautious about Mr Trump’s proposed trade policies, such as potential tariffs on Mexican and Chinese goods or a renegotiation of the US-Canada-Mexico North American Free Trade Agreement (NAFTA).

“Our China growth upgrade for 2017 is a key factor underpinning the coming year’s expected faster global recovery”. Mr Obstfeld also fears that a USA economy growing on short-term stimulus could run away into inflation as growth hits capacity constraints, with abrupt rather than gradual rises in interest rates.

This would cause a sharp appreciation of the dollar, lower growth, budget pressures and a wider current account deficit in the US.

He added that such a scenario could raise the specter of more protectionist measures and retaliatory responses.

October’s sovereign bond was the biggest ever emerging-market issuance, attracting $67 billion of bids, people familiar with the sale told Bloomberg at the time. “The details of the USA policy mix matter; as these become clearer, we will adjust our forecast and spillovers”.

China, the world’s second largest economy and a target for threatened tariffs by the incoming Trump team, is also laboring to keep growth chugging along. The IMF revised upwards China’s estimate based on expectations of a stimulus. A backlash against trade, immigration and worldwide cooperation in a number of countries, widespread levels of public and private debt and climate change all also pose threats globally.

But it also cautioned that the instability surrounding Britain’s terms of exit for the European Union could have adverse effects on both short and long term projections.

Other advanced economies where the growth rates have bene revised up include Germany, Spain, Japan, United Kingdom and Canada. As discussed in the October WEO, this projection reflects to an important extent a gradual normalization of conditions in a number of large economies that are now experiencing macroeconomic strains. It may even cut the rating if the government reform agenda stalls. Countries can do much on their own to improve financial oversight and institutions, but not everything, and continuing multilateral financial regulatory cooperation is vital.