April 12, 2016 IMF Survey
IMF COMMUNICATIONS DEPARTMENT
Media Relations
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Phone: 202-623-7100
Global growth continues, but at a sluggish pace that leaves the world economy more exposed to risks, says the IMF’s latest World Economic Outlook (WEO).
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The WEO forecasts global growth at 3.2 percent in 2016 and 3.5 percent in 2017, a downward revision of 0.2 percent and 0.1 percent, respectively, compared with the January 2016 Update (see table).
In a recent speech, IMF Managing Director Christine Lagarde warned that the recovery remains too slow, too fragile, with the risk that persistent low growth can have damaging effects on the social and political fabric of many countries.
“Lower growth means less room for error,” said Maurice Obstfeld, IMF Economic Counsellor and Director of Research. “Persistent slow growth has scarring effects that themselves reduce potential output and with it, demand and investment,” he added.
The current diminished outlook calls for an immediate, proactive response, Obstfeld noted. To support global growth, he emphasized, there is a need for a more potent policy mix—a three-pronged policy approach based on structural, fiscal, and monetary policies.
“If national policymakers were to clearly recognize the risks they jointly face and act together to prepare for them, the positive effects on global confidence could be substantial,” Obstfeld added.
Moderate recovery in advanced economies
Growth in advanced economies is projected to remain modest at about 2 percent, according to the WEO. The recovery is hampered by weak demand, partly held down by unresolved crisis legacies, as well as unfavorable demographics and low productivity growth.
In the United States, expected growth this year is flat at 2.4 percent, with a modest uptick in 2017. Domestic demand will be supported by improving government finances and a stronger housing market that help offset the drag on net exports coming from a strong dollar and weaker manufacturing.
In the euro area, low investment, high unemployment, and weak balance sheets weigh on growth, which will remain modest at 1.5 percent this year and 1.6 percent next year.
In Japan, both growth and inflation are weaker than expected, reflecting in particular a sharp fall in private consumption. Growth is projected to remain at 0.5 percent in 2016 before turning slightly negative to -0.1 percent in 2017, as the scheduled increase in the consumption tax rate goes into effect.
Emerging and developing economies slowing further
While emerging markets and developing economies will still account for the lion’s share of world growth in 2016, prospects across countries remain uneven and generally weaker than over the past two decades.
The WEO projects their growth rate to increase only modestly—relative to 2015—to 4.1 percent this year and 4.6 percent next year.
This forecast reflects a variety of factors:
• Slowing growth in oil exporters, with oil price decline, and still weak outlook for non-oil commodity exporters, including in Latin America.
• The modest slowdown in China, where growth continues to shift away from manufacturing and investment to services and consumption.
• Deep recessions in Brazil and Russia, and weak growth in some Latin America and Middle East countries, particularly those hit hard by the oil price decline and intensifying conflicts and security risks.
• Diminished growth prospects in many African and low-income nations due to the unfavorable global environment.
On the positive side, India remains a bright spot—with strong growth and rising real incomes. The ASEAN-5 economies—Indonesia, Malaysia, Philippines, Thailand, and Vietnam—are also performing well. And Mexico, Central America, and the Caribbean are beneficiaries of the U.S. recovery and, in most cases, lower oil prices.
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IMF COMMUNICATIONS DEPARTMENT
Media Relations
E-mail: media@imf.org
Phone: 202-623-7100
