IMF cuts 2015 global GDP forecast as advanced economies lag

Global economic growth will be slower this year than it was estimated two months ago as advanced economies led by the US and Canada are likely to perform weaker, the International Monetary Fund said on 9 July.

The world economic output is projected at 3.3% in the July edition of IMF's world economic outlook (WEO), down by 0.2 percentage points in the April WEO. The 2016 forecast is kept at 3.8%.

IMF said risks to global economic activity are 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," the Fund said.

"Lower commodity prices also pose risks to the outlook in low-income developing economies after many years of strong growth."

Advanced economies together will grow 2.1% in 2015, lower than the April projection of 2.4% while the 2016 growth is seen unchanged from the last estimate of 2.4%.

US and Canada

The world's largest economy will grow 2.1% in 2015 as per the latest estimate which compares to the April projection of 3.1%. The growth rate will rise to 3.0% in 2016, but that too is lower than the previous estimate of 3.1%.

In Canada, the rate of expansion will be 1.5% this year, down by 0.7 percentage points from the April WEO while the 2016 projection has increased by 0.1 percentage point to 2.1%.

"A setback to activity in the first quarter of 2015, mostly in North America, has resulted in a small downward revision to global growth for 2015 relative to the April WEO," IMF said.

Eurozone

Overall EU growth is seen unchanged at 1.5% for 2015 but up by 0.1 percentage point to 1.7% for the next year. Germany and France remained unchanged at 1.6% and 1.2% respectively for this year and 1.7% and 1.5% for 2016.

Italy's growth for both the years has been increased to 0.7% from 0.5% and to 1.2% from 1.1%. Spanish growth rate has also been projected to improve for this year and the next to 3.1% from 2.5% and 2.5% from 2%, respectively.

Emerging and developed economies

The group of emerging and developed economies will grow 4.2% this year, down by 0.1 percentage point in April WEO. The 2016 growth rate is seen at 4.7% with no change from the prior estimate.

"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," IMF said.

"A rebound in activity in a number of distressed economies is expected to result in a pickup in growth in 2016."