The global is not out of trouble yet and is teetering on the brink of another recession only six years after the last downturn, says the International Monetary Fund.
Economists at the IMF have slashed growth forecasts for the rest of the year to 3.1% – down from 3.4% last year and only 0.1% above the level triggering recession.
The organisation also warns the risks pulling the world economy down are worse now than they have been for some time.
Experts blame a number of factors for the crisis, including a slowdown in the leading emerging markets of China, Brazil and Russia; collapsing oil prices and worries about the US Federal Reserve hiking interest rates.
That’s not the end to the world’s woes.
Cloaked comments
The IMF also cites isolated risks that have resulted in drag on GDP.
These include the Greek bail-out saga, Russia’s involvement in the annexation of The Crimea in Ukraine and the inability of major developed economies to shake off persistent low inflation.
The IMF report is not all doom and gloom. Global growth is expected to float up to 3.6% by the end of 2016 – but that figure is subject to revision and may well falter.
IMF chief economist Maurice Obstfeld chose his words carefully when launching the report.
He did not actually say ‘recession’ but cloaked his comments in carefully chosen language.
“The hope of robust and synchronised global growth remains beyond us despite emerging from the worst post-war recession six years ago,” said Obstfeld.
Policy reforms
“The new forecasts mark down expected growth across the board and risks to the world economy are now worse than only six months ago.”
The IMF also admitted that although a slowdown was expected in China, the world’s second largest economy, the ripples that have spread out from the downturn were not predicted to be so damaging to the rest of the world.
“China’s problems have led to falling commodity prices around the world as demand falls and the country has called less on imports,” said Obstfeld.
The report calls for developed nations to step up output as a major economic policy supported by sensible monetary policy and an increase in investment.
“Policy reforms are specific to each country and will vary between them,” said Obstfeld.
