Member Article

IMF lowers economic growth forecast for next 2 years

The International Monetary Fund (IMF) has lowered its forecast for global economic growth for this year and next, and is now expecting growth of 3.5% this year, compared with the previous estimate of 3.8% which it made in October.

The growth forecast for 2016 has also been cut, to 3.7%, this comes despite a potential boost for the global economy, which is the sharp fall in oil prices, which is positive for most countries.

For the UK, the forecast for this year is unchanged at 2.7% and is cut slightly to 2.4% for 2016. The IMF sees the outlook for the UK as favourable, but that the weakness of the eurozone could act as “brake” on the British economy.

The forecast reflects lower expectations about the growth prospects for many developed and emerging economies over the next few years.

Eurozone

The IMF does expect the recovery in the Eurozone to continue, but not strongly. It is estimating growth of 1.2% in the euro area this year and 1.4% in 2016.

For the European Central Bank, the immediate priority is to tackle the deflation, or falling prices, now under way.

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”.

Russia

Russia has seen the sharpest downgrade of all, which is forecast to see its economy contract by 3% this year and 1% next. That is the result of the fall in oil prices and what the report calls increased geopolitical tensions - in other words, the crisis in Ukraine and Western sanctions on Russia.

United States

There are some exceptions to the pattern of more downbeat forecasts. The major one is the United States, now forecast to grow at 3.6% this year and 3.3% in 2016.

This was posted in Bdaily's Members' News section by Clare Burnett .