International Monetary Fund Scales Back Global Economic Forecast
The International Monetary Fund has undimmed expectations for global economic growth this year, despite Greece’s debt crisis and recent volatility in Chinese financial markets, but has scaled-back its 2015 growth forecast to take into account the impact of recent weakness in the U.S. economy.
In an update to its World Economic Outlook report released a few months ago, the IMF said the global economy should expand 3.3 percent this year, 0.2 percentage point below what it predicted in April.
Growth should speed up to 3.8 percent next year, it said, unchanged from earlier forecasts, it said.
The Washington, DC.-headquartered IMF pinned much of the blame for the lower growth forecast on the U.S., whose economy contracted in the first quarter, impaired by a drought in California impacting agricultural exports, unusually heavy snowfalls in other parts of the country, a resurgent dollar, and a cargo congestion and disruptions at key U.S. West Coast ports.
The 188-member nation IMF said it expected the U.S. economy to grow 2.5 percent this year, down from the 3.1 percent it forecasted in April. The Fund also said the country’s economic sluggishness had spilled over to NAFTA partners Canada and Mexico.
In developing economies, the IMF said growth “had been dampened by lower commodity prices, tighter financial conditions tied to economic rebalancing in China and geopolitical factors.”
Chinese stock markets have tumbled by more than 30 percent over the last month, prompting regulators to impose heavy-handed intervention to stem the rout.
The IMF said the 30-plus percent drop in the Chinese market over the past month suggests the country “could face difficulties as it tries to move from an investment-led economic growth model to one focused on domestic consumption.”
The Fund also repeated its warning that “asset price shifts and financial market volatility could disrupt predictions,” though it expects geopolitical tensions based on critical developments in Russia and the Middle East to wane over the coming year.