IMF cuts global growth forecast as China slows

Tue Jan 19, 2016 6:25pm EST
 
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By David Lawder

WASHINGTON (Reuters) - The International Monetary Fund cut its global growth forecasts for the third time in less than a year on Tuesday, as new figures from Beijing 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 percent in 2016 and 3.6 percent in 2017, both years down 0.2 percentage point from the previous estimates made last October. It said policymakers should consider ways to bolster short-term demand.

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 on Tuesday -- and plummeting oil prices.

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

China reported that growth for 2015 hit 6.9 percent after a year in which the world's second biggest economy endured huge capital outflows, a slide in the currency and a summer stock market crash.

Shares in Europe and Asia rose and the dollar gained after the China data was released, as investors anticipated greater efforts by Beijing to spur growth.

Concerns about Beijing's grip on economic policy have shot to the top of global investors' risk list for 2016 after falls in its stock markets and the yuan stoked worries that the economy may be rapidly deteriorating.   Continued...

 
A labourer works atop a construction site of a commercial building as residential complexes are pictured in the background, in Kunming, Yunnan province, China, December 12, 2015. REUTERS/Wong Campion