IMF Cuts World Growth Forecast

Weak Pickup in Global Growth, with Risks Pivoting to Emerging Markets

  1. Global growth forecast revised down—3.4 percent in 2016 and 3.6 percent in 2017
  1. Emerging market and developing economies facing increased challenges
  1. Key risks relate to China slowdown, stronger dollar, geopolitical tensions, renewed global risk aversion

The pickup in global growth is weak and uneven across economies, with risks now tilted toward the emerging markets, says the IMF’s latest World Economic Outlook (WEO) Update.
Advanced economies will see a modest recovery, while emerging market and developing economies face the new reality of slower growth.
The WEO Update now projects global growth at 3.4 percent this year and 3.6 percent in 2017 (see Table), slightly lower than the forecast issued in October 2015.

“This coming year is going to be a year of great challenges and policymakers should be thinking about short-term resilience and the ways they can bolster it, but also about the longer-term growth prospects,”

said Maurice Obstfeld, IMF Economic Counsellor and Director of Research.
”Those long-term actions,” he continued, “will actually have positive effects in the short run by increasing confidence and increasing people’s faith in the future.”
world map

    Marginal improvements in advanced economies

Growth in advanced economies is projected to rise to 2.1 percent and to hold steady in 2017, a slightly weaker pickup than that forecast in October.
Overall activity remains robust in the United States, supported by still-easy financial conditions and strengthening housing and labor markets. But there are also challenges stemming from the strength of the dollar, which is causing the U.S. manufacturing sector to shrink marginally.
In the euro area, stronger private consumption supported by lower oil prices and easy financial conditions is outweighing a weakening of net exports.
Growth in Japan is also expected to firm up in 2016, on the back of fiscal support, lower oil prices, accommodative financial conditions, and rising incomes.

    Emerging markets face growth slowdown

Emerging market and developing economies are now confronting a new reality of lower growth, with cyclical and structural forces undermining the traditional growth paradigm, as IMF chief Christine Lagarde pointed out in a recent speech.
Growth forecasts for most emerging market and developing economies reveal a slower pickup than previously predicted. Growth is projected to increase from 4 percent in 2015—the lowest rate since the 2008–09 financial crisis—to 4.3 and 4.7 percent in 2016 and 2017, respectively.
But these overall numbers fail to do full justice to the diversity of situations across countries.
India and parts of emerging Asia are bright spots, projected to grow at a robust pace, whereas Latin America and the Caribbean will again see a contraction in 2016, reflecting the recession in Brazil and economic stress elsewhere in the region, even as most other countries in the region will continue to grow.
Emerging Europe is expected to grow at a steady pace, albeit with some slowing in 2016, given that Russia could remain in recession in 2016. Most countries in sub-Saharan Africa will see a gradual pickup in growth, but only to rates that remain lower than those achieved during the past decade.
Source: IMF
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