The International Monetary Fund has revised up its growth forecasts for the euro area for this year and next, on the back of stronger than expected economic growth last year and in the first few months of this year.
In its updated World Economic Outlook, the IMF has also marked down growth in the United States and the United Kingdom.
The growth forecast in the US has been revised down from 2.3% to 2.1% in 2017 and from 2.5% to 2.1% in 2018.
While the markdown in the 2017 forecast reflects in part the weak growth outturn in the first quarter of the year, the major factor behind the growth revision, especially for 2018, is the assumption that fiscal policy will be less expansionary than previously assumed, given the uncertainty about the timing and nature of US fiscal policy changes.
Market expectations of fiscal stimulus have also receded.
The growth forecast has also been revised down for the UK for 2017 on weaker-than-expected activity in the first quarter.
By contrast, growth projections for 2017 have been revised up for many euro area countries, including France, Germany, Italy, and Spain, where growth for the first quarter of 2017 was generally above expectations.
This, together with positive growth revisions for the last quarter of 2016 and high-frequency indicators for the second quarter of 2017, indicate stronger momentum in domestic demand than previously anticipated.
The growth forecast for 2017 was also revised up for Canada, where buoyant domestic demand boosted first-quarter growth to 3.7% and indicators suggest resilient second-quarter activity, and marginally for Japan, where private consumption, investment, and exports supported first-quarter growth.