The global economy will grow 3.5% in 2015, down from 3.8% due to the slumping oil prices, the IMF has said in its January 2015 update to the October 2014 World Economic Outlook (WEO).
The IMF also cut its forecast for the economic growth next year, 2016, to 3.7% from 4%.
“The revisions reflect a reassessment of prospects in China, Russia, the euro area, and Japan as well as weaker activity in some major oil exporters because of the sharp drop in oil prices” the report says. Source: IMF
IMF 2015 global economic growth forecast summary
- The IMF has downgraded projections in major world economies, except for the United States, where economic growth is expected to reach 3.6% and 3.3% in 2015 and 2016, respectively.
- The slowdown in China is another factor behind the revised forecasts. On Tuesday, official figures showed that China’s growth slowed to 7.4% last year (its weakest in 24 years), from 7.7% in 2013.
- Russia saw the sharpest downwards revision to a contraction of 3% in 2015 and 1% in 2016.
Speaking to the BBC, the IMF’s chief economist, Olivier Blanchard, said deflation was an adverse and worrying force, but it was “not the kiss of death… in itself, it’s not going to derail the recovery”. However, he acknowledged that it was possible that deflation could set off the Eurozone’s debt crisis once again. Falling prices are particular problem for debtors, because their incomes – or for governments, their tax revenues – may fall, but the debt payments often do not.
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Mr Blanchard told the BBC that many countries have, for all practical purposes, done so – notably the US.
But there is another legacy “cramping the style of a number of countries which have very high debt and have to be careful”. He says this will take a very long time to rectify. He describes Japan as an extreme example.
His overall assessment: “Some of the legacies are going away. Some of the legacies will take a long time. Things are improving. Not quite as quickly as we would dream, but they do.” Source: BBC
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