Global FX reserves buck trend, rise in second quarter 2015

30 Sep 2015 | Author: | No comments yet »

IMF’s Lagarde: Global growth likely weak this year, modest acceleration in 2016.

The head of the International Monetary Fund said Wednesday that global growth will be weaker than anticipated and urged both advanced and emerging economies to enact reforms and stimulus measures to combat the slowdown. “We see global growth that is disappointing and uneven,” Christine Lagarde said in Washington DC, kicking off next week’s IMF-World Bank annual meetings in Lima, Peru. “In addition, medium-term growth prospects have become weaker. The ‘new mediocre’ of which I warned exactly a year ago – the risk of low growth for a long time – looms closer.” The IMF is slated to release its revised global growth forecasts at the meetings next week. Christine Lagarde warned that worldwide expansion will fall short of last year’s figures and that there will be only a modest expansion in 2016, reports Sam Fleming in Washington.

Certainly, we are at a difficult and complex juncture,” she said, explaining that she is worried about recent global affairs — and international economics are similarly distressing. “On the economic front, there is also reason to be concerned. The prospect of rising interest rates in the United States and China’s slowdown are contributing to uncertainty and higher market volatility,” she said. “There has been a sharp deceleration in the growth of global trade.

Much of the weakness can be traced to China’s slowdown as it transitions to a consumption driven economy and declining growth rates in countries such as Russia, Brazil and Latin America. “The good news is that we are seeing a modest pickup in advanced economies,” Lagarde said at an event sponsored by the Council of the Americas. “The moderate recovery is strengthening in the euro area; Japan is returning to positive growth; and activity remains robust in the US and the UK as well.” But she said China is slowing as it shifts from being an export led economy and launches reforms to raise incomes and living standards. And she said Russia and Brazil “are facing serious economic difficulties.” “Potential growth is being held back by low productivity, population aging, and the legacies of the global financial crisis,” including high debt, low investment and weak banks, particularly in Europe, Lagarde added. We are also seeing weaker activity in low-income countries – which will be increasingly affected by the worsening external environment.” “This will contribute to what could be a prolonged period of low commodity prices – a change that will need to be managed by policymakers, particularly in the large commodity exporters.” The WTO said it sees world trade growth of 2.8 percent this year and 3.9 percent in 2016, revised down from the forecasts it made in April of 3.3 percent and 4.0 percent, respectively. She said these developments are creating “spillover effects.” For example, China’s slowdown is driving down commodity prices and hurting countries that rely heavily on China to purchase their commodities, such as oil and iron ore.

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