IMF cuts global growth forecasts again, cites commodity and China worries

Tue Oct 6, 2015 10:09am EDT
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By David Chance

LIMA (Reuters) - The International Monetary Fund cut its global growth forecasts for a second time this year on Tuesday, citing weak commodity prices and a slowdown in China and warned that policies aimed at increasing demand were needed.

The Fund, whose annual meeting starts in Peru this week, forecast that the world economy would grow at 3.1 percent this year and by 3.6 percent in 2016.

Both new forecasts are 0.2 percentage point below its July forecast and are 0.4 percentage point and 0.2 percentage point below its April outlook, respectively.

The downgrades come after central banks in major industrial economies have cut rates to near zero and spent around $7 trillion in quantitative easing programs in the seven years since the global financial crisis. Despite these measures, investment, growth and productivity are stuck below pre-crisis levels and there is a lack of consumer demand.

Among major economies, the United States is expected to grow by 2.6 percent in 2015 and by 2.8 percent in 2016, the Eurozone is forecast to grow by 1.5 percent and 1.6 percent, respectively, with Japan seen at 0.6 percent and 1.0 percent.

The Fund sees growth in China slowing to 6.8 percent this year and 6.3 percent in 2016.

The biggest hit to growth will come in emerging economies where the IMF cut its growth forecast to 4 percent in 2015, due to a sharp slide in commodity prices.

"The distribution of risks to global growth remains tilted to the downside," the Fund said in its World Economic Outlook publication.   Continued...

Labourers work on scaffolding of a construction site of a residential and commercial complex in Beijing, China, September 18, 2015.  REUTERS/Kim Kyung-Hoon