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IMF Revised Global Forecast Down, Due To Risks Of China Slowdown, Strong Dollar, Geopolitical Tension And Renewed Global Risk Aversion

By January 20, 2016 at 4:52 am
IMF Revised Global Forecast Down, Due To Risks Of China Slowdown, Strong Dollar, Geopolitical Tension And Renewed Global Risk Aversion (Photo : Handout | Getty Images News)

The International Monetary Fund (IMF) has revised down its global forecast for the third time in less than a year, according to an update released by the IMF.

The cut is due to the increased challenges that emerging markets and developing countries are facing, particularly the slowdown in China, stronger dollar and the renewed global risk aversion.

The IMF has revised its global growth forecast down to 3.4 percent in 2016 and 3.6 percent in 2017, both slightly from the previous estimate in October.

Maurice Obstfeld, the IMF Economic Counsellor and Director of Research, said that 2016 is going to be a year of "great challenges."

He said, "that policymakers should be thinking about short-term resilience and the ways they can bolster it."

He adds that they should also be planning and thinking "about long-term growth prospects."

The IMF said that advanced economies will be seeing a modest recovery this year, but emerging markets and developing countries will be facing a new reality of slower growth.

Advanced economies are projected to rise to 2.1 percent this year and hold steady in 2017, with the U.S. expected to have an overall robust activity.

Still, it is slightly lower than the forecast in October.

Emerging markets and developing countries are expected to grow 4.3 percent and 4.7 percent in 2016 and 2017, respectively, it reveals a slower pickup than previously forecasted.

Risks also tilted downwards, due to the ongoing adjustments of the global economy, particularly China's slowdown, lower commodity prices and the progressive increase of the interest rates of the U.S.

Reuters reports that concerns about Beijing's grip on economic policy have shot up to the top of global investors' risk list for 2016.

This is due to the fall of the stock market and the yuan indicating that the country's economy may be deteriorating.

China's slowdown could also bring more international spillovers through trade, and commodity prices.

"All in all, there is a lot of uncertainty out there, and I think that contributes to the volatility," Obstfeld said. ""We may be in for a bumpy ride this year, especially in the emerging and developing world."

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