Globally 2016 will be bad: IMF

Berlin: Global economic growth will be disappointing next year and the outlook for the medium-term has also deteriorated, the head of the International Monetary Fund (IMF) said in a guest article for German newspaper Handelsblatt published on Wednesday.

IMF managing director Christine Lagarde said that the prospect of rising interest rates in the United States and an economic slowdown in China were contributing to uncertainty and a higher risk of economic vulnerability worldwide.

Added to that, growth in global trade has slowed considerably and a decline in raw material prices is posing problems for economies based on these, while the financial sector in many countries still has weaknesses and financial risks are rising in emerging markets, she said.

“All of that means global growth will be disappointing and uneven in 2016,” Ms Lagarde said, noting that mid-term prospects had also weakened as low productivity, ageing populations and the effects of the global financial crisis dampened growth.

In October, the IMF forecast that the world economy would grow by 3.6 per cent in 2016. She said the start of a normalisation of US monetary policy and China’s shift toward consumption-led growth were “necessary and healthy” changes. But she said these needed to be carried out as efficiently as possible as there are “potential spillover effe-cts” in the emerging markets.