Global growth fore­casts could be cut again: IMF

The Pak Banker - - COMPANIES/BOSS -

The In­ter­na­tional Mon­e­tary Fund may cut 2016 global growth fore­casts again in the com­ing weeks, ac­cord­ing to a se­nior IMF of­fi­cial who on Thurs­day called on pol­i­cy­mak­ers to take com­pre­hen­sive mea­sures to strengthen their economies.

In Jan­uary, the Fund pro­jected global growth of 3.4 per­cent in 2016 and 3.6 per­cent in 2017, hav­ing re­vised down its Oc­to­ber fore­cast for both years by 0.2 per­cent­age point. "It is very likely that by the time that we ar­rive at the spring meet­ings next month there may be a fur­ther down­ward re­vi­sion in our fore­casts," Jose Vi­nals, fi­nan­cial coun­sel­lor and di­rec­tor of the mon­e­tary and cap­i­tal mar­kets depart­ment said dur­ing an event or­gan­ised by the Re­serve Bank of In­dia. His com­ments echoed a warn­ing last month from Man­ag­ing Di­rec­tor Chris­tine La­garde, who said the global econ­omy could be de­railed un­less pol­i­cy­mak­ers took col­lec­tive ac­tion. "The cost of in­ac­tion will be costly in terms of global growth," Vi­nals said.

Ex­press­ing con­cern over China's slow­ing growth and "vul­ner­a­bil­i­ties" in its cor­po­rate and fi­nan­cial sec­tor, Vi­nals said its delever­ag­ing will be key to global fi­nan­cial sta­bil­ity. But he added that he did not fore­see a hard land­ing for the world's se­cond-largest econ­omy.

Vi­nals said In­dia needed to pri­ori­tise a clean-up of its banks' bal­ance sheets, while tack­ling a debt over­hang. He also said po­ten­tial cap­i­tal out­flows posed a risk. In­dian banks' stressed loans are at 13-year high of 8 tril­lion ru­pees ($119.12 bil­lion), con­strain­ing banks' abil­ity to lend and boost eco­nomic growth, which is pegged at 7.00-7.75 per­cent for 2016/17. Wor­ried that fur­ther rise in bad loans could im­pede the early re­cov­ery, RBI Gov­er­nor Raghu­ram Ra­jan has asked banks to pro­vide even for po­ten­tial bad as­sets af­ter pledg­ing to clean up lenders' books by March 2017.

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