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IMF Cuts Global Growth Forecast
Jan 22, 2016

The International Monetary Fund (IMF) cut its global economic growth forecast for 2016 as it expects a number of factors to weigh on world economies. Global growth for this year is seen at 3.4 percent, up from a 3.1 percent forecast for 2015, but 0.2 percent lower than previously forecast.

  • The IMF said, pickup in global activity is projected to be more gradual than in the October 2015 World Economic Outlook, especially in emerging market and developing economies.

  • The International Monetary Fund (IMF) cut its global growth forecasts for the third time in less than a year, as new figures from China showed that the Chinese economy grew at its slowest rate in a quarter of a century in 2015.

  • To back its forecasts, the IMF cited a sharp slowdown in China trade and weak commodity prices that are hammering Brazil and other emerging markets.

  • The Fund forecast that the world economy would grow at 3.4 per cent in 2016 and 3.6 per cent in 2017, both years down 0.2 percentage points from the previous estimates made last October.

  • The updated World Economic Outlook forecasts came as global financial markets have been roiled by worries over China’s slowdown, confirmed by official Chinese data and plummeting oil prices.

  • The IMF maintained its previous China growth forecasts of 6.3 per cent in 2016 and 6.0 per cent in 2017, which represent sharp slowdowns from 2015.

  • The IMF projected 7.3 per cent GDP growth for India in 2015-16 and 7.5 per cent in 2016-17, levels unchanged from its outlook released in October. In 2014-15, it estimates, GDP grew 7.3 per cent.

  • Risks to the global outlook remain tilted to the downside and relate to ongoing adjustments in the global economy.

  • IMF cited slower growth in emerging markets, especially in China, falling commodity prices, and rising interest rates in the U.S. as potential risks to global growth.

  • Weak Chinese manufacturing data—coupled with plunging commodity prices—have sent equity markets around the world into flux.

It said, Near-term fiscal policy should be more supportive of the recovery, especially through investments that would augment future productive capital. India and the rest of emerging Asia are projected to grow at a robust pace, although with some countries facing strong headwinds from China’s economic rebalancing and global manufacturing weakness.

In India, the Union Finance Ministry last November revised downwards its projection for the current financial year to 7.5 per cent after estimates from the Central Statistics Office showed that in the first six months, real GDP grew 7.2 per cent, slower than the 7.5 per cent in the corresponding period last year.

In February 2015, it projected that growth would accelerate to 8.1-8.5 per cent. The RBI’s forecast for growth this year is 7.4 per cent.

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