IMF lowers forecast for global economic growth in 2015 and 2016

The International Monetary Fund (IMF) has downgraded its forecast for global economic growth in 2015 and 2016. It also called for central banks and governments to explore accommodative monetary policies and structural reforms.

The IMF expects 2015 growth of 3.5%, lower than the previous estimate it made in October of 3.8%. The IMF also cut its growth forecast for 2016 down to 3.7%.

Olivier Blanchard, the IMF’s chief economist, said in a statement:

“New factors supporting growth, lower oil prices, but also depreciation of euro and yen, are more than offset by persistent negative forces, including the lingering legacies of the crisis and lower potential growth in many countries.” (Depreciation, the opposite of appreciation, refers to the declining value of something)

The United States was the only major economy to have its projected growth significantly increased, from 3.1% up to 3.6%.

The IMF expects the eurozone to grow, but not strongly, it estimates growth of 1.2% in 2015 and 1.4% in 2016. The immediate priority for the European Central Bank is to tackle deflation.

The IMF’s chief economist, Olivier Blanchard, told the BBC that deflation is an adverse and worrying force, but it was “not the kiss of death… in itself, it’s not going to derail the recovery.”

Projections for emerging economies were also cut back, with the outlook for major oil exporters being cut the most, such as Russia, Saudi Arabia, and Nigeria.

Crude oil has plummeted by more than 50 percent since June last year, and it hasn’t rebounded, mainly because of the OPEC’s decision to not cut oil production – a decision that is unlikely to change.

Blanchard told reporters at a news conference launching the report:

“We expect the decrease in price to be quite persistent,” adding “We expect some return, some increase, but surely not an increase back to levels where we were, say, six months ago.”

Slower 2015 growth in China “reflects the welcome decision by the authorities to take care some of the imbalances which are in place and the desire to reorient the economy towards consumption and away from the real estate sector and shadow banking,” Blanchard said.

Shadow banking refers to the banking activities carried out by non-bank entities, such as hedge funds, investment banks and other securitization vehicles. These institutions are not regulated.