IMF lowers global economic forecast

The International Monetary Fund has cut its projections for the whole world’s economic growth for this year and next, citing stagnation in advanced economies.

In the IMF’s semi-annual World Economic Oultook report issued on Tuesday, the fund said global economy will grow by 3.3 percent, down 0.1 percentage point from July and 0.4 point less than estimates made in April.

The 2015 outlook has been lowered to 3.8 percent growth, from the 4.0 percent previously forecast, the global crisis lender said.

The Russia-Ukraine crisis and strife in the Middle East are weighing on the global economy, which also faces the risk of the wider economic threat if the Ebola outbreak in West Africa is not contained, the report said.

The report also said that the deep wounds of the economic crunsh, which began in 2008, are “proving tougher to resolve”, especially in Europe.

“Given these increased risks, raising actual and potential growth must remain a priority,” the Fund said in its report.

It also said that the strength of advanced economies could be enhanced with much-needed investment in infrastructure, financed by the state.

“Should the recovery stall, being ready to do more would be important,” it said.

Regional forecasts

The growth forecast for the world’s largest economy, the United States, inched upwards 0.5 percentage point to 2.2 percent this year, Its forecast for 3.1 percent growth in the US next year was unchanged, recognizing the country’s sharp rebound from a first-quarter contraction.

Projections for the eurozone, however, witnessed a big blow. Describing recovery in the 18-nation bloc as “slow and tentative”, the fund cut estimates for the region’s growth to just 0.8 percent this year, down from its 1.1 percent July estimates. Forecasts for the region’s 2015 growth was reduced to1.3 percent from 1.5 percent.
 
Japan’s estimates were slashed to 0.9 percent this year, the fund said, down from the 1.6 percent growth which IMF previously projected. The country’s growth rate is seen to slip to 0.8 percent next year, down from its July estimate of 1 percent.

The fund’s forecasts for China, the world’s second-largest economy, were unchanged at 7.4 percent this year and 7.1 percent in 2015, and while those figures would be healthy for most nations, they represent the slowest growth for China in decades.

Prospects were significantly dimmer than before for Latin America, the Middle East and North Africa, and the rest of Africa.

The IMF report also evoked a worry increasingly discussed among economists, “secular stagnation” in advanced economies, where private demand and investment growth dries up, and job creation slows well shy of the goal of full employment.