By Peter OBIORA InvestAdvocate
Lagos (INVESTADVOCATE)-The International Monetary Fund (IMF) on Thursday projected global growth at 3.3 percent in 2015, marginally lower than in 2014 with a gradual pickup in advanced economies and a slowdown in emerging market and developing economies, while in 2016, growth is expected to strengthen to 3.8 percent, according to the latest report of the key World Economic Outlook (WEO) released by the Fund.
The report says this is coming on the backdrop of a setback to activity in the first quarter (Q1) of 2015, mostly in North America, resulting in a small downward revision to global growth for 2015 relative to the April 2015 WEO.
The updated forecast says growth in advanced economies is projected to increase from 1.8 percent in 2014 to 2.1 percent in 2015 and 2.4 percent in 2016, a more gradual pickup than was forecast in the April 2015 WEO.
“The unexpected weakness in North America, which accounts for the lion’s share of the growth forecast revision in advanced economies, is likely to prove a temporary setback. The underlying drivers for acceleration in consumption and investment in the United States—wage growth, labour market conditions, easy financial conditions, lower fuel prices, and a strengthening housing market—remain intact,” the IMF’s WEO update affirmed.
According to the IMF, the economic recovery in the euro area seems broadly on track, with a generally robust recovery in domestic demand and inflation beginning to increase.
Growth projections have been revised upward for many euro area economies, but in Greece, unfolding developments are likely to take a much heavier toll on activity relative to earlier expectations.
It further affirmed in Japan, growth in the Q1 of 2015 was stronger than expected, supported by a pickup in capital investment. “However, consumption remains sluggish and more than half of quarterly growth stemmed from changes in inventories. With weaker underlying momentum in real wages and consumption, the pickup in growth in 2015 is now projected to be more modest,” the report added.
The global lender said despite the underlying drivers for a gradual acceleration in economic activity in advanced economies—easy financial conditions, more neutral fiscal policy in the euro area, lower fuel prices, and improving confidence and labour market conditions—remain intact.
In emerging markets and developing economies, growth is projected to slow from 4.6 percent in 2014 to 4.2 percent in 2015, broadly as expected.
The Fund noted the slowdown reflects the dampening impact of lower commodity prices and tighter external financial conditions—particularly in Latin America and oil exporters, the rebalancing in China, and structural bottlenecks, as well as economic distress related to geopolitical factors—particularly in the Commonwealth of Independent States and some countries in the Middle East and North Africa.
“In 2016, growth in emerging market and developing economies is expected to pick up to 4.7 percent, largely on account of the projected improvement in economic conditions in a number of distressed economies, including Russia and some economies in the Middle East much of the growth slowdown in recent years has amounted to a moderation from above-trend growth,” the IMF WEO update said.
According to the Fund, in emerging market economies, the continued growth slowdown reflects several factors, including lower commodity prices and tighter external financial conditions, structural bottlenecks, rebalancing in China and economic distress related to geopolitical factors.
It reported that a rebound in activity in a number of distressed economies is expected to result in a pickup in growth in 2016.
“The distribution of risks to global economic activity is still tilted to the downside. Near-term risks include increased financial market volatility and disruptive asset price shifts, while lower potential output growth remains an important medium-term risk in both advanced and emerging market economies. Lower commodity prices also pose risks to the outlook in low-income developing economies after many years of strong growth,” the IMF report said.
