IMF cuts global growth forecasts

The International Monetary Fund has cut its global growth forecasts for the next two years, as the slowdown in China, weaker commodity prices and strain in some large emerging market economies weigh on prospects.

In its latest World Economic Outlook, the IMF said it now expects the global economy to grow 3.4% and 3.6% this year and the next, with both estimates down 0.2 percentage points from the October forecast.

“The projected pickup in growth in the next two years— despite the ongoing slowdown in China—primarily reflects forecasts of a gradual improvement of growth rates in countries currently in economic distress, notably Brazil, Russia, and some countries in the Middle East, though even this projected partial recovery could be frustrated by new economic or political shocks,” the IMF said.

The IMF’s forecast for UK growth was unchanged, at 2.2% for 2016 and 2017.

Estimates for Chinese growth were also kept, at 6.3% for 2016 and 6% for 2017, although this is still a marked slowdown from 6.9% growth last year.

However, it downgraded its expectations for growth in Brazil by 2.5 percentage points to a 3.5% contraction this year and now sees Russia’s economy contracting 1% versus a previous estimate of 0.6% contraction.

The IMF also cut its forecast for US growth, to 2.6% from 2.8% in October.

“Overall activity remains resilient in the United States, supported by still-easy financial conditions and strengthening housing and labor markets, but with dollar strength weighing on manufacturing activity and lower oil prices curtailing investment in mining structures and equipment.”

On the upside, the IMF lifted its forecast for Eurozone growth in 2016 by 0.1 percentage point to 1.7%.