As the recovery in global activity is set to be more gradual than expected earlier, especially in the emerging market and developing economies, the International Monetary Fund lowered its global growth projections for this year and the next on Tuesday.
In an update to its biannual World Economic Outlook, the Washington-based lender cut this year’s growth forecast to 3.4 percent from 3.6 percent. The outlook for the next year was lowered to 3.6 percent from 3.8 percent.
The growth estimate for 2015 was retained at 3.1 percent.
“These revisions reflect to a substantial degree, but not exclusively, a weaker pickup in emerging economies than was forecast in October,” the IMF said.
“A modest and uneven recovery is expected to continue” in advanced economies, but the situation is “diverse” and in many cases “challenging” for emerging and developing economies, the report said.
“The slowdown and rebalancing of the Chinese economy, lower commodity prices, and strains in some large emerging market economies will continue to weigh on growth prospects in 2016-17,” the IMF said.
Among emerging markets, the IMF was largely concerned about Brazil, where political uncertainty surrounding the Petrobras investigation has led to a severe recession. The country’s GDP projection for this year was sharply cut by 2.5 percentage points to -3.5 percent. The outlook for the next year was lowered by 2.3 percentage points to zero.
Equally concerning for the lender was the situation in the Middle East, where prospects are hurt by lower oil prices. The 2016 growth outlook for Saudi Arabia was cut to 1.2 percent from 2.2 percent and the outlook for the next year was slashed to 1.9 percent from 2.9 percent.
And, plateauing of growth in the U.S. was another main reason for lowering global forecasts this time. The economy is expected to grow 2.6 percent this year and the next, but both projections were cut by 0.2 percentage points each.
Among other emerging markets, Russia’s economy is forecast to contract 1 percent this year, which is 0.4 percentage points worse than the pace seen earlier. The growth projection for the next year was retained at 1 percent.
China, which is adjusting to the ‘new normal’ of slower growth and a weaker currency, had its projections for this year and the next maintained at 6.3 percent and 6 percent, respectively.
Similarly, IMF’s growth forecasts for India for both years were left unchanged at 7.5 percent each.
Meanwhile, the growth projections for eurozone this year and the next were raised to 1.7 percent each. The biggest euro area economy, Germany, was also expected to a faster than initially estimated rate of 1.7 percent.
France, which is battling stubbornly high unemployment, had its forecasts for the two years cut to 1.3 percent and 1.5 percent, respectively.
The growth projections for Italy were maintained at 1.3 percent and 1.2 percent, while those for Spain were raised to 2.7 percent and 2.3 percent.
Japan’s growth projection for this year was maintained at 1 percent and the outlook for the next year was lowered to 0.3 percent.
The outlook for the U.K. for this year and next was retained at 2.2 percent each.
Advanced economies are expected to expand 2.1 percent each this year and the next, which is 0.1 percentage points slower than earlier projections.
The growth in the emerging markets and developing economies is projected to increase from 4 percent in 2015, the lowest since the 2008-09 financial crisis, to 4.3 and 4.7 percent in 2016 and 2017, respectively.
The material has been provided by InstaForex Company – www.instaforex.com