The IMF Revises Global Growth Downwards to a Modest 3.2% for 2016

According to the International Monetary Fund’s (IMF) latest World Economic Outlook (WEO) entitled “Too Slow for Too Long”, global growth is projected at 3.2% in 2016, in line with that of last year, but 0.2 percentage points lower than January’s edition of the WEO.

The downward revision is the result of increasing financial turbulence, slower economic activity in advanced economies and severe macroeconomic conditions in in Brazil, Russia and some other commodity exporters.

Looking ahead to 2017 and onwards, advanced economies are expected to have a modest growth as well as a weakened potential growth. A stronger recovery in advanced economies is being hindered by “unfavorable demographic trends, low productivity growth and legacies from the global financial crisis”.

Therefore, the IMF expects global economic growth to recover to 3.5% in 2017 but that will be driven by emerging markets and developing economies.

It is important to note that the 2017 projected recovery relies on several crucial assumptions for the IMF:

  • China transitioning into a more balanced growth after prior excesses in its economy
  • Commodity exporters seeing a pick-up in activity, even if it’s at slower rates than in the past
  • Conditions normalizing in several economies under stress
  • Growth being resilient in other emerging markets and developing economies

The IMF recommends that advanced economies seek structural reforms, continued monetary policy accommodation but also fiscal policies, where fiscal space allows. In fact, it is widely approved amongst economists that monetary policies relying on negative interest rates cannot be sustainable in the long run since there’s a limit to how negative interest rates can be without leading to cash hoarding. Therefore, fiscal policies must also be implemented to boost growth.

As for Lebanon’s growth projections, they are not far from the global economic gloom. Real GDP growth was revised downwards to 1% in 2015 and 2016 compared to 2% and 2.5% projected back in July 2015’s Article Four Consultations.

Key Growth Rates for the Global Economy

Year on Year Growth Rates201420152016p2017p
World Output3.43.13.23.5
Advanced Economies1.81.91.92
Emerging Market and Developing Economies4.644.14.6
World Trade Volume (goods and services)3.52.83.13.8
Oil Prices (US Dollars)-7.5-47.2  
Consumer Prices in:    
Advanced Economies1.40.30.71.5
Emerging Market and Developing Economies4.74.74.54.2

Source: IMF

 

 

 

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