Global growth will be disappointing in 2016 - Lagarde
Global economic growth will be 'disappointing' next year, the head of
the International Monetary Fund said in a guest article for German
newspaper Handelsblatt published recently.
IMF Managing Director Christine Lagarde said the prospect of rising
interest rates in the United States and an economic slowdown in China
were contributing to uncertainty and a higher risk of economic
vulnerability worldwide. Growth in global trade has slowed considerably
and a decline in raw material prices is posing problems for economies
based on these, while the financial sector in many countries still has
weaknesses and financial risks are rising in emerging markets, Lagarde
said.
"This means global growth will be disappointing and uneven in 2016,"
Lagarde said, adding that low productivity, aging populations and the
effects of the global financial crisis were putting the brakes on
growth.
She said the start of normalization of US monetary policy and China's
shift towards consumption-led growth were 'necessary and healthy'
changes but needed to be carried out as efficiently and smoothly as
possible. The US Federal Reserve hiked interest rates for the first time
in nearly a decade earlier this month and made clear that was a
tentative beginning to a 'gradual' tightening cycle.
There are "potential spillover effects," with the prospect of
increasing interest rates there already having contributed to higher
financing costs for some borrowers, including in emerging and developing
markets, Lagarde said.
She added that while countries other than highly developed economies
were generally better prepared for higher interest rates than they had
been in the past, she was concerned about their ability to absorb
shocks.
"Most highly developed economies except the USA and possibly Britain
will continue to need loose monetary policy but all countries in this
category should comprehensively factor spillover effects into their
decision-making," Lagarde said.
She warned that rising US interest rates and a stronger dollar could
lead to firms defaulting on their payments and that this could then
'infect' banks and states.
- IMF |