China risks trigger IMF downgrade of global GDP
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.