THE International Monetary Fund has cut its global economic growth forecast for this year with the risk of a further reduction before 2015 is out.
While this might not be too much of a surprise given the gyrations in world financial markets in recent weeks, the IMF downgrade was largely the result of an unexpected weak start to the year in the United States rather than events in Greece and China.
But in an update of its April World Economic Outlook, released on Thursday, the IMF does warn that risks to the outlook remain tilted to downside, including from increased market volatility and lower commodity prices.
It has cut its 2015 global growth forecast to 3.3 per cent from 3.5 per cent three months ago, but it has kept its 2016 prediction at 3.8 per cent.
While the update does not include a specific forecast for Australia, “other advanced economies” — where it would be grouped — has been trimmed to 2.7 per cent from 2.8 per cent for 2015.
For China, Australia’s number one trading partner, it has kept its growth forecasts of 6.8 per cent and 6.3 per cent for this year and next.
However, the Washington-based institution does note the difficulties facing China as it grapples with a rapidly declining share market.
On Europe, it believes the recovery remains on track, but unfolding developments in Greece are expected to take a heavier toll on activity there relative to earlier expectations,
“Developments in Greece have, so far, not resulted in any significant contagion,” it said.
In downgrading the US, the IMF said this was largely the result of one-off factors of a hard US winter and port closures, as well as a downsizing of business spending in the oil sector.
However, it says the underlying factors for an acceleration in consumption and investment in the world’s largest economy remain intact.