The International Monetary Fund cut its world expansion forecast, as weak exports and slowing investment dim prospects in the U.S., a consumption-tax hike saps growth in Japan, and a slump in the price of everything from oil to wheat continues to hobble commodities producers. The world economy will grow 3.2 percent this year, down from a projected 3.4 percent in January, the IMF said Tuesday in a quarterly update to its World Economic Outlook.
The weaker outlook is likely to weigh on finance ministers and central bankers from around the globe, who gather in Washington this week for spring meetings of the IMF and World Bank, as well as a Group of 20 session. The fund also cut its forecast for growth in 2017 to 3.5 percent, down from 3.6 percent three months ago.
“Growth has been too slow for too long,” IMF chief economist Maurice Obstfeld said in remarks prepared for a press briefing. “There is no longer much room for error.”
“But by clearly recognizing the risks they jointly face and acting together to prepare for them, national policy makers can bolster confidence, support growth, and guard more effectively against the risk of a derailed recovery,” he said.
The IMF cited among the biggest risks as a “return of financial turmoil itself, impairing confidence and demand in a self-confirming negative feedback loop.”
‘Scarring Effects’
“Another threat is that persistent slow growth has scarring effects that themselves reduce potential output and with it, consumption and investment,” the IMF said. “Consecutive downgrades of future economic prospects carry the risk of a world economy that reaches stalling speed and falls into widespread secular stagnation.”
The fund cited several political and geopolitical pressures, including the rise of populism in the U.S. and Europe; the U.K.’s June referendum on whether to stay in the European Union; and large-scale refugee inflows that add to strains in Europe.
While growth forecasts for the U.S. and euro area were marked down by 0.2 percentage point, the deepest reductions in advanced economies came in Japan.
The IMF cut its expansion estimate for the nation in half for 2016, to 0.5 percent, and projects a 0.1 percent contraction in 2017, compared with a previous forecast for 0.3 percent growth. The fund cited recent strengthening of the yen and weaker emerging-market demand for the forecast cut, and the scheduled consumption-tax increase for the 2017 slide.
One bright spot: The IMF upgraded its China growth forecasts by 0.2 percentage point for this year and next, following signs of “resilient domestic demand” and growth in services that offset weakness in manufacturing.
makati1 on Tue, 12th Apr 2016 9:16 am
The world as a whole is in a contraction/recession. A few countries are still growing but are being offset by the steeper decline and contraction/depression in the Western and Western wannabee countries. There will be no turnaround and growth again. Debt is the cause. Greed caused the debt. The end of cheap plentiful energy is over. That was what powered the temporary growth.
sidzepp on Tue, 12th Apr 2016 9:38 am
Ms. Zepp and I receive three Credit Card and one loan consolidation offer in the mail every day. Our children, who do not reside with us, also receive several a week. I belief this shows panic in the BAU economy as they try to woo consumers to spend more money to keep the consumption cycle robust. Bottom line, more debt at all levels will lead to catastrophic collapse in the near future.
paulo1 on Tue, 12th Apr 2016 9:44 am
3.2% and 3.5%? Wait for it….wait for it….REVISIONS.
Sissyfuss on Tue, 12th Apr 2016 8:19 pm
I gotta agree with makattack,diminishing resources combined with a growing population overlain with an increasingly
hostile environment does not bode well for those pursuing happiness. It now reads “Life, Liberty and Hanging In There.
Apneaman on Tue, 12th Apr 2016 8:51 pm
sidzepp, in Canada they have what is called – L.I.R.A. locked in retirement account. It’s a self managed pension that must have a minimum of 25% Canadian securities to get your tax deferment. A number of years back my bank sent me a “helpful” notice that the rules had been amended with a new “hardship” clause. No proof of hardship required other than signing a release form with the financial/bank you have your account with. You get nailed up to 25% tax if you sell and get the cash. I don’t have any numbers but I’m betting it worked on people the same way a mortgage refi did. Get mo money for mo shit you don’t really need. Cashing in might not be the worst idea considering one could get bailed in any day now. Smoke em while you got em kids.
GregT on Tue, 12th Apr 2016 11:29 pm
If it were possible to maintain a growth rate of 3.5% per annum, global GDP would double by ~2035.
Good luck with that.
twocats on Tue, 12th Apr 2016 11:38 pm
“Growth has been too slow for too long,” IMF chief economist Maurice Obstfeld said. “There is no longer much room for error.” [article]
dear god don’t let planter and boat see this article as it completely goes against their world view that the world is chugging along BAU.
makati1 on Tue, 12th Apr 2016 11:38 pm
GregT, few here understand math beyond that needed to count money or understand the price tag on their purchases. And a few have trouble with even doing that. It amazes me how few people actually think. I guess it is too painful.
GregT on Wed, 13th Apr 2016 12:14 am
Bartlett was correct mak. The greatest shortcoming of the human race….
It’s painful to watch.