IMF chief says global econ­omy likely to be weaker this year

The China Post - - WORLD BUSINESS -

The head of the In­ter­na­tional Mon­e­tary Fund (IMF) said Wed­nes­day that global growth will likely be weaker this year as the world econ­omy con­fronts a host of prob­lems, in­clud­ing a refugee cri­sis in Europe, an eco­nomic slow­down in main­land China and a pend­ing rise in U.S. in­ter­est rates.

IMF Man­ag­ing Di­rec­tor Chris­tine La­garde pre­dicted a mod­er­ate re­bound in growth in ad­vanced economies such as the United States, Europe and Ja­pan. But emerg­ing economies will ex­pe­ri­ence a fifth con­sec­u­tive year of slow­ing ac­tiv­ity, she said.

La­garde said po­ten­tial growth is be­ing held back by low pro­duc­tiv­ity, ag­ing pop­u­la­tions and lin­ger­ing prob­lems from the 2008 fi­nan­cial cri­sis such as high debt lev­els. She said it will be crit­i­cal to prop­erly man­age the tran­si­tion in China to con­sumer-led growth and the pend­ing move by the U.S. Fed­eral Re­serve to higher in­ter­est rates.

In a speech pre­view­ing next week’s an­nual meet­ings of the 188- na­tion IMF and its sis­ter lend­ing agency, the World Bank, La­garde said that cur­rently global growth is “dis­ap­point­ing and un­even,” with many emerg­ing mar­ket na­tions los­ing rev­enue from fall­ing prices of com­modi­ties such as oil.

La­garde said that the IMF would re­lease its up­dated eco­nomic fore­casts next week. While she did not re­veal spe­cific fig­ures, she said growth was ex­pected to be weaker this year than last year, with a mod­est ac­cel­er­a­tion ex­pected in 2016.

The global econ­omy ex­panded by 3.4 per­cent in 2014. The IMF’s pre­vi­ous forecast was for growth of just 3.3 per­cent this year.

In her speech, La­garde called In­dia a bright spot for the global econ­omy. But she noted that Rus­sia and Brazil are fac­ing “se­ri­ous eco­nomic dif­fi­cul­ties,” with growth also slow­ing sharply in many Latin Amer­i­can coun­tries.

The meet­ings next week will be held in Lima, Peru, mark­ing the first time in 48 years that the an­nual meet­ings of the two in­ter­na­tional lend­ing agen­cies will be held in Latin Amer­ica.

La­garde said that China’s tran­si­tion from ex­port-led growth to a fo­cus on do­mes­tic-led growth pre­sented a num­ber of chal­lenges for Chi­nese of­fi­cials. They are faced with a need to im­ple­ment dif­fi­cult re­forms, while at the same time pro­tect­ing growth and fi­nan­cial sta­bil­ity.

La­garde noted that China con­sumes 60 per­cent of the world’s pro­duc­tion of iron ore. But as it switches to lower pro­duc­tion, its de­mand for var­i­ous com­modi­ties will de­cline.

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