UPDATE 1-IMF lowers global growth forecasts, cites US weakness

9 Jul 2015 | Author: | No comments yet »

IMF News Conference on World Economic Outlook, Greece.

WASHINGTON – The U.S. economy’s stumble at the start of 2015 is dragging down the world’s growth to the lowest level since the Great Recession, the International Monetary Fund said Thursday.The IMF in its World Economic Outlook report for July, it has sliced Pakistan’s expected growth rate by 0.3 per cent to 2.6 per cent for 2015 as compared to 2.9 per cent projected in April this year. On the global front, it trimmed its forecast for global economic growth for this year to take into account the impact of recent weakness in the United States. But the global financial institution said growth prospects for next year remain undimmed, despite Greece’s debt crisis and recent volatility in Chinese financial markets.

The IMF also maintained its forecasts for a pickup in growth in the euro zone, despite Greece moving ever closer to the edge of default and an exit from the currency bloc as it races to find a last-minute third bailout. “Developments in Greece have, so far, not resulted in any significant contagion,” the IMF said. “Timely policy action should help manage such risks if they were to materialize.” In developing economies, the IMF said growth had been dampened by lower commodity prices, tighter financial conditions tied to the economic rebalancing in China and geopolitical factors. But Blanchard said: “We don’t see it as a major macroeconomic issue.” That is because ordinary Chinese mostly did not spend the paper gains in their stock portfolios as shares climbed to dangerous heights over the past year; so they are not likely to cut back now. Chinese stock markets have tumbled by more than 30 per cent over the last month, prompting regulators to impose heavy-handed intervention to stem the rout.

The IMF predicts the eurozone will grow 1.5 per cent this year, unchanged from April’s forecast; Japan will grow 0.8 per cent, down from an April forecast of 1 per cent; and the Brazilian economy will shrink 1.5 per cent, a downgrade from April’s forecast for a 1 per cent drop. The Fund also repeated its warning that asset price shifts and financial market volatility could disrupt its predictions, though it expects the economic situation in Russia and the Middle East to calm down next year.

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