Washington, Sep 26 (IANS): The global economy will expand faster next year while still facing challenges, such as low productivity, high income inequality and low inflation, according to a senior International Monetary Fund (IMF) official.

"The most recent IMF forecast, issued in July, projected global growth at 3.5 per cent this year and 3.6 per cent in 2018... The Fund will issue its next World Economic Outlook in a week, and there is every reason to see these trends continuing,"Zhang Tao, deputy managing director of the IMF, said on Monday.

Zhang said the IMF's emergency lending has declined as countries have found their financial footing again as the impact of the global crisis fades, reports Xinhua news agency.

However, he warned of the challenges the global economy is still facing, such as low productivity growth, income polarisation in some advanced economies, and low inflation.

"Innovation has reshaped labour and product markets. However, this disruptive change has taken place without an apparent increase in productivity," said Zhang.

Low productivity growth has also contributed to the rise of income inequality in advanced economies, because it has become more difficult to raise living standards due to low productivity, according to the official.

Another challenge facing the global economy is low inflation linked to the low level of wage growth, said Zhang.

He attributed low wage growth to structural forecasts, such as weak productivity growth, aging population and the increasing consolidation of companies.

"Achieving stronger growth will require the right combination of policies, especially to reinforce labour and capital markets," said Zhang.

He called for a range of reforms to improve efficiency and competitiveness of the global economy.