IMF cuts global growth forecast
Growth in the world’s largest economy was trimmed by twotenths of a point to 1.7pc
The International Monetary Fund yesterday cut its global economic growth forecast, citing new downside risks in key emerging-market economies and a deeper recession in the eurozone. The IMF projected the world's economy would grow 3.1 per cent in 2013, down from its April estimate of 3.3pc.
China and other emerging economic powers now face new risks, it warned, “including the possibility of a longer growth slowdown.“ The global lender said that growth had been affected by increased financial market volatility and rising interest rates in advanced economies since its last World Economic Outlook report was published in April.
“Emerging-market economies have generally been hit hardest,“ the Fund said in its update of the WEO report. The expected US Federal Reserve's unwinding of its massive monetary policy stimulus could trigger sustained capital out flows from emerging-markets, the IMF warned. “Monetary easing can be the first line of defence against downside risks” in emerging market and developing economies, where inflation was generally expected to moderate, it said. But fiscal policy options may be limited.
“Real policy rates are low already, and capital outflows and price effects from exchange rate depreciation may also constrain further easing, ” the Fund said.
Growth in the emerging market and developing economies was expected to slow to 5pc in 2013, instead of the 5.3pc expansion seen a few months ago.
The main impact was being seen on the top emerging market economies, the “BRICS” Brazil, Russia, India, China, and South Africa. “After years of strong growth, the BRICS, to call them that way, are beginning to run into speed bumps, ” said IMF chief economist, Olivier Blanchard.
China, the world’s second biggest economy and a main engine of global growth, would expand by 7.8pc, three-tenths of a point slower than thought. The forecast for Russia was slashed by 0.9 points to 2.5pc, and South Africa was cut 0.8 point to 2pc. Lower prices were also curbing growth in commodity exporters.
Crude oil prices were expected to fall 4.7pc, while non-oil commodity prices were projected to decline 1.8pc. Some of Sub-Saharan Africa’s largest economies, such as Nigeria and South Africa, face weaker growth in part due to weaker external demand, while in the Middle East and North Africa, growth remains weak “because of difficult political and economic transitions, ” the IMF said.
US growth was weakening under pressure from government spending cuts that offset improving demand in the private sector, notably from a recovery in the housing market. Growth in the world’s largest economy was trimmed by twotenths of a point to 1.7pc.
- Jordan secures EU finance for socioeconomic and environmental programs
- US, EU protectionist policies may be a blessing in disguise for GCC suppliers
- Dubai to Doha: How far can you stretch your dirham?
- Tunisia 2020 investment conference: 145 mega projects on offer
- GCC tax on expats' income and remittances would be highly regressive: IMF