China risks trig­ger IMF down­grade of global GDP

Financial Mirror (Cyprus) - - FRONT PAGE -

econ­o­mists be­lieve that China over­re­ports its GDP fig­ure, and the im­prove­ment may have been as low as 5% last year.

The IMF uses China’s of­fi­cial num­ber. Based on that fig­ure, China’s 6.9% growth will drop to 6.3% this year and 6.0% in 2017. Its pe­riod as the en­gine of the global econ­omy has ended.

Two ma­jor economies that have lagged over the course of the re­ces­sion re­cov­ery will con­tinue to do so. The Euro­pean Union GDP im­prove­ment was 1.5% last year and will be flat at 1.7% in 2016 and 2017. Ja­pan will barely grow. Af­ter an im­prove­ment of 0.6% in 2015, 1.0% this year and up 0.2% ac­cord­ing to the IMF fore­cast

With the ex­cep­tion of In­dia, the world’s other large emerg­ing economies will strug­gle. The IMF fore­casts In­dia’s GDP will rise by 7.5% this year and next. How­ever, its GDP is not large enough to come close to off­set­ting prob­lems in those other large emerg­ing na­tions. Iron­i­cally, the U.S. econ­omy will be a foun­da­tion of global growth in the next two years. Amer­ica’s econ­omy was sup­posed to drag on global GDP. Af­ter a 2.5% i mprove­ment in 2015, the IMF it will be in 2017, fore­casts 2.6% in 2016 and 2017.

The IMF’s con­clu­sion: “Look­ing be­yond the short-run fore­casts, there are im­por­tant risks to the out­look, which are par­tic­u­larly prom­i­nent for emerg­ing mar­ket and de­vel­op­ing economies and could stall global re­cov­ery.”

“Th­ese risks re­late mostly to the on­go­ing ad­just­ments of the global econ­omy, namely China’s re­bal­anc­ing, lower com­mod­ity prices, and the prospects for the pro­gres­sive in­crease in in­ter­est rates in the United States.”

In other words, the IMF hints that its GDP num­bers may be too high.

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