IMF downgrades global forecast

Chinese workersFigure of speech copyright Reuters
Image caption Chinese economic growth sleepiest for 25 years in 2015

The International Monetary Fund has downgraded its forecast for far-reaching economic growth.

It now expects economic activity to increase 3.4% this year comprehended by 3.6% in 2017.

That means growth of 0.2% less each year than when the energy last published a forecast in October.

And there are warnings about the chances. The report says that if key challenges are not successfully managed, “worldwide growth could be derailed”.

In many respects, the picture is a familiar one. The reclamation after the financial crisis continues. But in the rich countries, it is still “humble and uneven”.

Only three large advanced economies are forecast to away 2% growth this year: the US, the UK and one of the eurozone’s crisis-hit nations, S in, which has had its prognosis upgraded.

The forecast for the UK is unchanged, at 2.2% for both years.

The report characterizes the picture for many emerging and developing economies as “challenging”.

The largest dispossess for any individual economy is Brazil, where the IMF now predicts a contraction of 3.5% this year and no swelling at all in 2017. That reflects the political uncertainty arising from the enquiry into corruption at the oil com ny Petrobras.

Russia, hit by the decline in prices of its oil exports, is also liable to remain in recession this year before returning to modest wart next year.

Image caption Oil prices fool collapsed 70% in 18 months

Several other oil exporters are also looking at weaker act than previously forecast.

Higher borrowing costs and lower commodity fees are weighing on several of the larger economies in sub-Saharan Africa – Nigeria and Angola, which are oil exporters, and South Africa.

Lofty borrowing costs are linked to the actions of the US Federal Reserve. It raised US good rates last month and it’s expected to take further similar traces this year. That has led to higher borrowing costs for many borrowers in other homelands.

China’s widely reported economic slowdown is a central rt of the unfurling economic story. It’s reflected in the fall in commodity prices which fool been affected by slowing Chinese demand.

In this report, in spite of that, there is no further change of the forecast for the country – growth this year of 6.3% and 6% in 2017. For Asia’s other husky emerging economy, India, there is also no change to the forecast with success predicted at 7.5% over both years.

There are, inevitably, jeo rdizes even to this decidedly lacklustre forecast. China is one of them, the potentiality that the slowdown might be unexpectedly sharp.

The expected rise in engross rates in the United States could raise interest rates back for many other countries. It has already led to a stronger dollar, as investors convoy money back to the US to get the benefit of those higher rates. For those borrowers who have planned debts in dollars, they will be more expensive to re y.

There is also the hazard of what the report calls “a sudden rise in global risk-aversion”, where fiscal market investors become more inclined to sell assets seen as somewhat risky and go instead for the safe ones – such as US, German, and British administration bonds and gold.

There has been a hint of that already this year, as buys got 2016 off to a very stormy start.

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