Uncertainty, complex forces weigh on global growth - IMF

The IMF's latest World Economic Outlook (WEO) foresees lower global growth compared to last year, with modest pickup in advanced economies and a slowing in emerging markets, primarily reflecting weakness in some large emerging economies and oil-exporting countries.

"Six years after the world economy emerged from its broadest and deepest postwar recession, the holy grail of robust and synchronized global expansion remains elusive," said the IMF Economic Counsellor and Director of the Research Department, Maurice Obstfeld .

"Despite considerable differences in country-specific outlooks, the new forecasts mark down expected near-term growth marginally but nearly across the board. Moreover, downside risks to the world economy appear more pronounced than they did just a few months ago," Obstfeld said.

Global real GDP grew at 3.4 percent last year, and is forecast to grow at only 3.1 percent this year. Growth is expected to rebound to 3.6 percent next year.

These forecasts reflect a world economy that is at the intersection of at least three powerful forces, Obstfeld said. First, China's economic transformation - away from export and investment-led growth and manufacturing, in favour of a greater focus on consumption and services; second, and related, the fall in commodity prices; and third, the impending increase in US interest rates, which can have global repercussions and add to current uncertainties.

In this global environment, with the risk of low growth for a long time, the WEO underlines the need for policymakers to raise actual and potential growth. Recovery in advanced economies on course Growth in advanced economies is projected to increase modestly to 2 percent this year and 2.2 percent next.

This year's pickup reflects primarily a strengthening of the modest recovery in the euro area and a return to positive growth in Japan, supported by declining oil prices, accommodative monetary policy, and improved financial conditions, and in some cases, currency depreciation. While growth is expected to increase in 2016, especially in North America, medium-term prospects remain subdued, reflecting a combination of lower investment, unfavourable demographics, and weak productivity growth.

Slower growth in emerging and developing economies growth prospects in emerging markets and developing economies vary across countries and regions. But the outlook in 2015 is generally weakening, with growth for these economies as a group projected to decline from 4.6 percent in 2014 to 4.0 percent in 2015.

The fifth straight year of slowing growth reflects a combination of factors: weaker growth in oil exporters, a slowdown in China with less reliance on commodity-intensive investment, adjustment in the aftermath of credit and investment booms, and a weaker outlook for exporters of other commodities, including in Latin America, following declines in their export prices.

In addition, geopolitical tensions and domestic strife in a number of countries remain high, with immense economic and social costs. External conditions are becoming more difficult for most emerging economies.

The prospect of rising U.S. interest rates and a stronger dollar has already contributed to higher financing costs for some borrowers, including emerging and developing economies. And while the growth slowdown in China is so far in line with forecasts, its cross-border repercussions appear larger than previously envisaged, including through weaker commodity prices and reduced imports.

- IMF