Global growth will be disappointing in 2016: IMF's Lagarde

Wed Dec 30, 2015 5:43am EST
 
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By Michelle Martin

BERLIN (Reuters) - Global economic growth will be disappointing next year and the outlook for the medium-term has also deteriorated, the head of the International Monetary Fund said in a guest article for German newspaper Handelsblatt published on Wednesday.

IMF Managing Director Christine Lagarde said the prospect of rising interest rates in the United States and an economic slowdown in China were contributing to uncertainty and a higher risk of economic vulnerability worldwide.

Added to that, growth in global trade has slowed considerably and a decline in raw material prices is posing problems for economies based on these, while the financial sector in many countries still has weaknesses and financial risks are rising in emerging markets, she said.

"All of that means global growth will be disappointing and uneven in 2016," Lagarde said, noting that mid-term prospects had also weakened as low productivity, ageing populations and the effects of the global financial crisis dampened growth.

In October the IMF forecast that the world economy would grow by 3.6 percent in 2016.

Lagarde said the start of a normalization of U.S. monetary policy and China's shift toward consumption-led growth were "necessary and healthy" changes but needed to be carried out as efficiently and smoothly as possible.

The U.S. Federal Reserve hiked interest rates for the first time in nearly a decade this month and made clear that was a tentative beginning to a "gradual" tightening cycle.

There are "potential spillover effects", with the prospect of increasing interest rates there already having contributed to higher financing costs for some borrowers, including in emerging and developing markets, Lagarde said.   Continued...

 
Managing Director of the International Monetary Fund Christine Lagarde speaks at a press conference at the Treasury in London, which was attended by Britain's Chancellor of the Exchequer George Osborne, December 11, 2015. REUTERS/Stefan Rousseau/Pool