WASHINGTON (TIP): The US economy’s stumble at the start of 2015 is dragging down the world’s growth prospects, the International Monetary Fund said on July 9.
The IMF forecasts 3.3 per cent global growth this year, down from the 3.5 per cent it predicted in April. The main culprit: The American economy, world’s biggest, shrank at a 0.2 per cent annual rate from January to March, hurt by nasty weather. The IMF last month cut the outlook for US growth to 2.5 per cent in 2015, from April’s 3.1 per cent. The US economy grew 2.4 per cent in 2014.
The fund expects the US economy to grow 3 per cent in 2016.
IMF research chief Olivier Blanchard downplayed the wider economic impact of the Greek debt crisis and the possibility that Greece could be forced to abandon the euro currency. “The effects on the rest of the world economy are likely to be limited,” he said.
The IMF expects global growth to improve to 3.8 per cent next year.
Meantime, America’s first-quarter troubles are pinching its neighbors.
The IMF trimmed Mexico‘s 2015 growth forecast to 2.4 per cent from 3 per cent and Canada‘s to 1.5 per cent from 2.2 per cent.
The multinational lending agency kept its forecast for China‘s economic growth unchanged at 6.8 per cent this year and 6.3 per cent in 2016.
The Chinese stock market has plunged, with the Shanghai Composite index down 30 per cent from its peak less than a month ago. But Blanchard said: “We don’t see it as a major macroeconomic issue.” That is because ordinary Chinese mostly did not spend the paper gains in their stock portfolios as shares climbed to dangerous heights over the past year; so they are not likely to cut back now. Moreover, Blanchard said, the stock market is small compared with the size of China’s economy, the world’s second largest.
The IMF predicts the eurozone will grow 1.5 per cent this year, unchanged from April’s forecast; Japan will grow 0.8 per cent, down from an April forecast of 1 per cent; and the Brazilian economy will shrink 1.5 per cent, a downgrade from April’s forecast for a 1 per cent
drop.