Despite a sharp decline in oil prices, the world economic outlook is subdued, weighed down by underlying weakness elsewhere, says the International Monetary Fund (IMF) in its latest update to the World Economic Outlook (WEO).
Compared to the October 2014 WEO, the IMF survey revises down the global growth forecast by 0.3 percent to 3.5 per cent for 2015. For 2016 too, the growth rate has been revised downwards by 0.3 per cent to 3.7 per cent.
Factors supporting growth like lower oil prices and the depreciation of euro and yen are more than offset by persistent negative forces, including the lingering legacies of the crisis and lower potential growth in many countries.
“At the country level, the cross currents make for a complicated picture,” says Olivier Blanchard, IMF economic counsellor and director of research.
“It means good news for oil importers, bad news for oil exporters. Good news for commodity importers, bad news for exporters. Continuing struggles for the countries which show scars of the crisis, and not so for others. Good news for countries more linked to the euro and the yen, bad news for those more linked to the dollar.”
In advanced economies, growth is projected to rise to 2.4 per cent in both 2015 and 2016. However, there is the increasing divergence between the United States, on the one hand, and the euro area and Japan, on the other. For 2015, the US economic growth has been revised up to 3.6 percent, largely due to more robust private domestic demand. In contrast, weaker investment prospects weigh on the euro area growth outlook, which has been revised down to 1.2 per cent, despite the support from lower oil prices, further monetary policy easing, a more neutral fiscal policy stance, and the recent euro depreciation. In Japan, where the economy fell into technical recession in the third quarter of 2014, growth has been revised down to 0.6 per cent.
In emerging market and developing economies, growth is projected to remain broadly stable at 4.3 per cent in 2015 and to increase to 4.7 per cent in 2016—a weaker pace than forecast in the October 2014 WEO. Three main factors explain this downward shift. First, the growth forecast for China has been marked down to below 7 per cent. Second, Russia’s economic outlook is much weaker, with growth forecast downgraded to –3.0 percent for 2015, as a result of the economic impact of sharply lower oil prices and increased geopolitical tensions.
Third, in many emerging and developing economies, the projected rebound in growth for commodity exporters is weaker or delayed compared with the October 2014 projections.
The weaker global growth forecast for 2015–16 underscores the need to raise actual and potential growth in most economies, emphasises the WEO update. This means a decisive push for structural reforms in all countries, even as macroeconomic policy priorities differ. (RKS)
