IMF cuts global growth outlook again, warns of political risks

Tue Apr 12, 2016 5:40pm EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By David Lawder

WASHINGTON (Reuters) - The International Monetary Fund warned on Tuesday of the risk of political isolationism, notably Britain's possible exit from the European Union, and the risk of growing economic inequality as it cut its global economic growth forecast for the fourth time in a year.

In the run-up to the annual spring meetings of the IMF and the World Bank in Washington, D.C. this week, the IMF said the global economy was vulnerable to shocks such as sharp currency devaluations and worsening geopolitical conflicts.

In its latest World Economic Outlook, the IMF forecast global economic growth of 3.2 percent this year, compared to a forecast of 3.4 percent in January. The growth estimate also was lowered in July and October of last year.

For 2017, the IMF said the global economy would grow 3.5 percent, down 0.1 percentage point from its January estimate.

Its latest report cited a worsening spillover from China's economic slowdown as well as the impact of low oil prices on emerging markets such as Brazil. It also highlighted persistent economic weakness in Japan, Europe and the United States.

The gloomier picture sets the stage for the IMF and the World Bank to call this week for more coordinated global action to support growth.

"In brief, lower growth means less room for error," IMF's chief economist, Maurice Obstfeld, told a news conference, adding that "scarring effects" from years of tepid growth could in turn weaken demand, thin the workforce, and reduce potential output further, creating a scenario of "secular stagnation."

  Continued...

 
Maurice Obstfeld, Economic Counsellor and Director, Research Department of IMF delivers the International Monetary Fund's media briefing on the world economic outlook during its annual meeting in Lima, Peru, October 6, 2015. REUTERS/Mariana Bazo/Files