By Peter OBIORA InvestAdvocate
Lagos (INVESTADVOCATE)- The International Monetary Fund (IMF) have cut its global economic growth forecast to 3.5 percent in 2015, down from 3.8 percent projected in October.
Similarly, global economic growth in 2016 is projected 3.7 percent compared with the previous four (4) percent, both years with downward revisions of 0.3 percent relative to the October 2014 World Economic Outlook (WEO).
The IMF says global growth will receive a boost from lower oil prices, which reflect to an important extent higher supply. ‘’But this boost is projected to be more than offset by negative factors, including investment weakness as adjustment to diminished expectations about medium-term growth continues in many advanced and emerging market economies,’’ the global lender said.
According to the Washington-based lender, the United States (US) is the only major economy for which growth projections has been raised. The IMF upgraded its forecast for the US economy to 3.6 percent growth in 2015, up from 3.1 percent in October. ‘’Growth is projected to exceed 3 percent in 2015–16, with domestic demand supported by lower oil prices, more moderate fiscal adjustment, and continued support from an accommodative monetary policy stance, despite the projected gradual rise in interest rates. But the recent dollar appreciation is projected to reduce net exports,’’ the Fund said.
Slow growth rate are projected in China, Russia, the euro area, Japan and some major oil exporters due to the sharp decline in oil prices. ‘’Stagnation and low inflation are still concerns in the euro area and in Japan,’’ the Fund added.
Olivier Blanchard, IMF’s chief economist said in a press conference in Beijing last Tuesday that the world is facing strong and complex cross currents. “On the one hand, major economies are benefiting from the decline in the price of oil. On the other, in many parts of the world, lower long-run prospects adversely affect demand, resulting in a strong undertow,” Blanchard affirmed.
The global lender cut its outlook for consumer price gains in advanced economies to one (1) percent for 2015; while emerging markets and developing economies inflation rate will climb up 5.7 percent, a 0.1 percent higher from the Fund’s October projections.
The IMF says in emerging market and developing economies, growth is projected to remain broadly stable at 4.3 percent in 2015 and to increase to 4.7 percent in 2016—a weaker pace than forecast in the October 2014 WEO.
The global lender noted that three (3) main factors explain the downshift which includes lower growth in China and its implications for emerging Asia due to a decline in investment growth in the third quarter of 2014.
The second downshift is a much weaker outlook for Russia caused by lower oil prices and increased geopolitical tensions.
While the third is the downward revisions to potential growth in commodity exporters in emerging and developing economies as a result of lower oil prices and other commodity prices; both has affected negatively two (2) of Africa’s largest economies, Nigeria and South Africa.
Leaders from around the world are currently converged in Davos, Switzerland to begin the world Economic Forum annual meetings.
