The International Monetary Fund has lowered its forecast for global economic growth for this year and next.
The world economy will grow 3.5 percent in 2015, down from the 3.8 percent pace projected in October, the International Monetary Fund said in its quarterly global outlook released on Tuesday. The Washington-based lender also cut its estimate for growth next year to 3.7 percent, compared with 4 percent in October, Bloomberg News reported.
“New factors supporting growth, lower oil prices, but also depreciation of euro and yen, are more than offset by persistent negative forces, including the lingering legacies of the crisis and lower potential growth in many countries,” Olivier Blanchard, the IMF’s chief economist, said in a statement.
The IMF urged advanced economies to maintain accommodative monetary policies to avoid increasing real interest rates as cheaper oil heightens the risk of deflation.
It cut its outlook for consumer-price gains in advanced economies almost in half to 1 percent for 2015. Developing economies will see inflation this year of 5.7 percent, a 0.1 percentage point markup from October’s projections, the fund said.
The IMF marked down 2015 estimates for places including the euro area, Japan, China and Latin America. The deepest reductions were in places suffering from crises, such as Russia, or for oil exporters including Saudi Arabia.
Last week, managing director Christine Lagarde said oil prices and US growth “are not a cure for deep-seated weaknesses elsewhere”.
The fund upgraded its forecast for the United States to 3.6 percent growth in 2015, up from 3.1 percent in October. Cheap oil, more moderate fiscal tightening and still-loose monetary policy will offset the effects of a gradual increase in interest rates and the curb on exports from a stronger dollar, it said.
In Europe, weaker investment will overshadow the benefits of low oil prices, a cheaper currency and the European Central Bank’s anticipated move to expand monetary stimulus by buying sovereign bonds, Bloomberg said, quoted from the IMF report.
The fund lowered its forecast for the 19-nation euro area to 1.2 percent this year, down from 1.3 percent in October.
It also trimmed the estimate for China’s growth to 6.8 percent, down 0.3 percentage point from October. The economy is forecast to slow to 6.3 percent in 2016.
The Chinese government will probably “put greater weight on reducing vulnerabilities from recent rapid credit and investment growth and hence the forecast assumes less of a policy response to the underlying moderation”, the IMF said.
For Japan, the fund cut its estimate for growth to 0.6 percent this year, from 0.8 percent in October, after Japan slid into recession in the third quarter.
India’s growth is seen accelerating to 6.5 percent in the fiscal year through March 2017 after growth of 6.3 percent in fiscal 2016.
The IMF reduced its estimate for emerging-market growth this year to 4.3 percent, down from 5 percent in October, Bloomberg said.
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