The International Monetary Fund cut its global growth forecasts again and warns that “global financial stability is not yet assured”.
The IMF expects the global economy to expand 3.1% this year and 3.6% in 2016.
These new forecasts are 0.2% lower than its July forecasts.
The fund said that because of the plunge in commodity prices it has lowered its growth forecast for emerging economies down to 4% in 2015.
The IMF warns that “global financial stability is not yet assured”.
In the latest Global Financial Stability Report IMF official Jose Vinals said that financial stability in advanced economies has improved, however, he noted that emerging economies are at risk.
“The distribution of risks to global growth remains tilted to the downside,” the Fund said, adding that company and bank finances are “stretched thinner in many emerging markets”.
The Fund said that ”downside risks to growth for emerging market and developing economies have increased, given the risks to China’s growth transition, more protracted commodity market rebalancing, increased foreign exposure of corporate balance sheets and capital flow reversals associated with disruptive asset price shifts.”
The IMF expects growth in China to drop to 6.8 percent this year and 6.3 percent in 2016.
The report said that financial markets across the world have become more sensitive to Chinese economic performance and policy.
Vinals added: “Growth is slowing for the fifth year in a row, as the commodity super cycle and unprecedented credit booms have come to an end. This is of special relevance given the large share of emerging markets in the world economy, as well as the role that global markets play in transmitting shocks to other emerging markets and spillovers to advanced economies, featured in this summer’s financial turmoil.”
