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January 21, 2015

International Monetary Fund Lowers Global Forecast

The International Monetary Fund has lowered its forecast for global economic growth for the next two years. Despite the downgrading, the world economy will still be growing faster than in 2014.

In its latest World Economic Outlook report, released on Tuesday, IMF lowered a forecast made in October by 0.3 percentage points for the next two years.

It now projects global growth at 3.5 percent for 2015 and 3.7 percent for 2016.

"New factors supporting growth, lower oil prices, but also depreciation of euro and yen, are more than offset by persistent negative forces, including the lingering legacies of the crisis and lower potential growth in many countries," Olivier Blanchard, the IMF's chief economist, said in a statement.

Tuesday's figures come just days after head of the IMF, Christine Lagarde, said that a sharp drop in oil prices and a stronger US economy would probably not be enough to brighten the outlook for global growth in the course of 2015.

Despite the sharp fall in oil prices, which is proving to be positive for most countries, the IMF expects that these positive effects could be outweighed by negative factors, including weaker investment and geopolitical risks such as turmoil in the Middle East and war in Ukraine.

In response to the downgrading, the IMF has called for governments and central banks to pursue accommodative monetary policies "through other means" and structural reforms to support growth over the next two years.

In a predominantly gloomy report, projections for emerging economies were also broadly cut back, with the outlook for oil exporters Russia, Nigeria and Saudi Arabia worsening the most. The IMF also cut projections for Brazil and India.

US grows and China slows down

Figures released on Tuesday also showed that China's economy has seen its slowest growth in two decades at 7.4 percent - narrowly missing its full year target of 7.5 percent

Blanchard, the IMF's director of research, said that the slower growth in China would hurt nations it imports from, especially in Asia.

"The most obvious risks involve stagnation in the eurozone, or Japan, or both."

For the US, at least, 2015 is looking a little brighter, with its projected growth raised to 3.6 percent from 3.1 percent for this year, despite the appreciation of the dollar.

 

Text by Deutsche Welle
 

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