The International Monetary Fund has cut its global growth forecast for 2015 after a harsh winter led to a weak start in the US.
In an update to its World Economic Outlook (WEO), the Washington-based IMF said it now expected global output to expand by 3.3%, down from the 3.5% it pencilled in three months ago.
Growth in the US is now projected to be 2.5% this year, opposed to the 3.1%the IMF forecast in April. The UK’s growth forecasts have been cut from 2.7% to 2.4% in 2015 and from 2.3% to 2.2% in 2016.
The updated WEO showed global growth at 3.3% in 2015, slightly lower than the 3.4% recorded in 2014. In 2016, growth is expected to strengthen to 3.8%.
The IMF said it saw activity in the advanced economies picking up from 2.1% this year to 2.4% in 2016, but accepted that the expected acceleration in growth had yet to materialise.
“Disruptive asset price shifts and a further increase in financial market volatility remain an important downside risk,” it said. “Raising actual and potential output through a combination of demand support and structural reforms continues to be the economic policy priority.”
In advanced economies, the IMF advised central banks to keep bolstering activity and push up inflation. Countries with strong public finances should spend more on infrastructure projects, it said.
“In economies with high public debt, the pace of fiscal consolidation needs to strike an appropriate balance between debt reduction and imposing a drag on economic activity. Efforts at implementing structural reforms remain urgent across advanced economies, both to tackle crisis legacies and to raise potential output.”
It added that the economic recovery in the eurozone was broadly on track. “Growth projections have been revised upward for many euro area economies, but in Greece, unfolding developments are likely to take a much heavier toll on activity relative to earlier expectations.”
The IMF added: “The underlying drivers for a gradual acceleration in economic activity in advanced economies – easy financial conditions, more neutral fiscal policy in the euro area, lower fuel prices, and improving confidence and labour market conditions – remain intact.”
This article was written by Larry Elliott, for theguardian.com on Thursday 9th July 2015 14.01 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010