The International Monetary Fund sharply cut its 2015-2016 world growth forecast of only six months ago, saying lower oil prices did not offset pervasive weaknesses around the globe. The IMF said poorer prospects in China, Russia, the euro area and Japan will hold world growth to just 3.5 per cent this year and 3.7 per cent in 2016. That was 0.3 percentage points lower than in its previous World Economic Outlook in October, and underscored the steady deterioration of the economic picture for many countries, due to sluggish investment, slowing trade and falling commodity prices. While the United States will remain the one bright spot among major economies, Europe will continue to struggle with disinflation, and China’s growth, hit by slower export growth and a real estate slump, will drag to its slowest pace in a quarter-century. The IMF forecast that the United States, the world’s largest economy, will expand by 3.6 per cent this year, up a half-percentage point from the previous outlook. China, the second largest economy, will expand at 6.8 per cent this year – 0.3 per cent slower than previously expected – and 6.3 per cent in 2016, the IMF said. The last time Chinese growth fell below seven per cent was in the crunch of 1990, when it slowed to 3.8 per cent. The impact of slower Chinese growth will spill over especially to other Asian countries, the IMF said, resulting in its downgrade of their growth prospects as well. For the eurozone and Japan, it said, “stagnation and low inflation are still concerns” requiring sustained monetary easing untraditional means to keep interest rates from rising. In the eurozone, where the region’s central bank is expected to decide to boost stimulus this week, low oil prices and the depreciated euro are a help to growth.
Posted on: Wed, 21 Jan 2015 09:44:37 +0000
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