The IMF believes risks to the global growth outlook are two sided but are assessed to be skewed to the downside, especially over the medium term.
“Recent political developments highlight a fraying consensus about the benefits of cross-border economic integration,” the IMF said.
“A potential widening of global imbalances coupled with sharp exchange rate movements, should those occur in response to major policy shifts, could further intensify protectionist pressures.
Increased restrictions on global trade and migration would hurt productivity and incomes, and take an immediate toll on market sentiment.”
On a positive note, the IMF predicts that after a lacklustre outturn in 2016, economic activity is projected to pick up pace in 2017 and 2018, especially in emerging market and developing economies.
“However, there is a wide dispersion of possible outcomes around the projections, given uncertainty surrounding the policy stance of the incoming US administration and its global ramifications,” it said.
The IMF said that the assumptions underpinning the forecast should be more specific by the time of the April 2017 World Economic Outlook, as more clarity emerges on US policies and their implications for the global economy.