International Monetary Fund managing director Christine Lagarde warned today that greater resilience would be needed from the world’s emerging economies to handle China’s slowdown.
She cautioned that the road ahead could be “somewhat bumpy.’’
Lagarde was speaking at the University of Indonesia.
During her visit today thousands demonstrated in the capital Jakarta for better wages and against job losses.
She said global growth this year would be “likely weaker” than previously anticipated, less than two months after the IMF cut its global forecast for 2015 to 3.3 percent.
Emerging markets from Indonesia to Brazil have been bruised by China’s slowdown.
A slump in Chinese demand for commodities has hammered emerging economies and their currencies, while a recent rout on Chinese stock markets and the depreciation of the yuan has only worsened their worries.
The IMF still expects Asia to lead global growth, but Lagarde admitted the pace was slower than expected and could further lag, highlighting the need for “ever greater resilience.’’
Speaking in Indonesia, where China’s slowdown has contributed heavily to poor economic growth, Lagarde said many emerging economies risked being caught “on the wrong side” of this recent financial market volatility and needed to remain vigilant.
Aside from China’s slowdown, emerging economies faced weaker capital inflows, higher interest rates and financial upheaval if the US Federal Reserve lifts interest rates this year, the IMF chief said.
Lagarde said growth in China wasn’t slowing sharply and had been expected, but conceded the country’s transition to a more market-based economy was “complex and could well be somewhat bumpy.’’
“Other emerging economies, including Indonesia, need to be vigilant to handle potential spillovers from China’s slowdown and tightening of global financial conditions,” she added.
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