IMF Slashes Global Growth Forecast In Its First 2016 Update

The International Monetary Fund (IMF) has cut its forecast for global growth for the next two years, a forecast that is not surprising considering the global market slowdown which has increased from the start of the year.

Issuing an update to its World Economic Outlook, the IMF has said that growth for 2016 would be at 3.4% and 3.6% in 2017. It has put the world output 0.2 points lower in 2016 and 2017 as compared to what it had forecast three months ago.

In a statement, the IMF said,

Risks to the global outlook remain tilted to the downside and relate to ongoing adjustments in the global economy: a generalised slowdown in emerging market economies, China’s rebalancing, lower commodity prices, and the gradual exit from extraordinarily accommodative monetary conditions in the United States. If these key challenges are not successfully managed, global growth could be derailed.

Providing guidance for navigating this downtrend, the IMF has suggested that central banks should continue to focus on improving growth and that finance ministries should improve spending on investment where possible. Governments needed to reduce big budget deficits but there must also be action that is “growth friendly and equitable”.

The IMF has stated that the downward revision is mostly reflecting the pessimistic outlook for some of the emerging economies arising from events that occurred after October 2015. It has also warned that a “tide of refugees” was putting the European Union under strain and the migrants needed to be provided employment opportunities to manage the situation.

In its update, the IMF has noted that Brazil’s recession was deeper and more protracted than previously expected. It has also lowered growth estimates for Russia and Saudi Arabia as oil producing nations such as Brazil, Russia and Saudi Arabia have been badly affected by the rapidly falling oil price.

In its forecast for the United States, the IMF has reduced 0.2 points off its previous estimate for 2016 and 2017, saying that the economy was “marking time” rather than building growth momentum but increased its output to 2.6 % for both years. The IMF expects Europe to have a better outlook with an increase of 0.1 percentage points since its October estimates for 2016 but has left the 2017 estimate of 1.7 % untouched. It has also left its UK estimates of 2.2 % for both 2016 and 2017 unchanged.

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