A resilient China, rising commodity prices and sturdy financial markets are offering a sunnier outlook for the global economy and helping dispel the gloom that has lingered since the Great Recession ended.
The gloomy regional prediction is in contrast to a slightly brighter outlook for the world economy as a whole, which the International Monetary Fund forecasts will grow by 3.5 per cent this year, up 0.1 per cent from its previous update and up from 3.1 per cent last year.
Thanks to improvements in the manufacturing and trade sectors, the global economy will reach growth of 3.5% in 2017 and 3.6% in 2018 (after a 3.1% rise in 2016).
The world economy is set to grow 3.5% this year after 3.1% expansion in 2016, the Washington-based lender said in its latest World Economic Outlook report.
Maurice Obstfeld, economic counsellor for the IMF, said: "Mainly in advanced economies, several factors-lower growth since the 2010-11 recovery from the global financial crisis, even slower growth of median incomes, and structural labour market disruptions-have generated political support for zero-sum policy approaches that could undermine worldwide trading relationships, along with multilateral cooperation more generally".
While the forecast growth for many economies has been increased slightly, the 0.5% rise in predicted United Kingdom growth this year is striking - it is, by far, the biggest change made in any of the IMF's forecasts. Banks were weak and reluctant to lend, and deeply indebted governments made growth-killing budget cuts.
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It also raised its forecast for growth next year to 6.2 percent from the previous 6.0 percent.
'Though highly uncertain, medium-term growth prospects have also diminished in the aftermath of the Brexit vote because of the expected increase in barriers to trade and migration, as well as a potential downsizing of the financial services sector amid possible barriers to cross-border financial activity, ' the International Monetary Fund added.
Oil prices have surged almost 40 percent in the past year, partly because oil-producing countries agreed to curb production. The forecast for the unemployment rate remained unchanged.
In the run-up to last June's European Union referendum, the IMF's French director Christine Lagarde warned that the consequences of a Leave vote ranged from "bad to very bad" and could wipe out almost 10 per cent off our economy. They also expect President Donald Trump to deliver tax cuts and infrastructure spending that could help boost USA economic growth. And so far, it has signaled unexpectedly modest goals for rewriting NAFTA.
"One salient threat is a turn toward protectionism, leading to trade warfare", Obstfeld said, adding this "would result in a self-inflicted wound that would lead to higher prices for consumers, lower productivity and therefore, lower overall real income for households".