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IMF revises downward global economic growth
February 25, 2016, 6:06 pm

Lagarde said that even for advanced economies, activity is projected to pick up only modestly this year [Xinhua]

Lagarde said that even for advanced economies, activity is projected to pick up only modestly this year [Xinhua]

Christine Lagarde spent the last two years of her first term as the head of the International Monetary Fund warning that the global economy was vulnerable and could falter given successive shocks such as the impact of China’s slowing economy.

A few days after she was reelected as the head of the most powerful financial organization in the world, the IMF released a report reiterating her fears of a global economic slow down.

In its annual report prepared for the upcoming G20 finance ministers summit in Shanghai, the IMF said the global recovery following recession in some countries has weakened further due to increasing financial turbulence and falling asset prices.

“Activity softened towards the end of 2015 and the valuation of risky assets has dropped sharply, especially in advanced economies, increasing the likelihood of a further weakening of the outlook,” the report said.

In its October global economic outlook report, the IMF had initially forecast a growth rate of 3.6 per cent for 2016 and 3.8 per cent for 2017.

Lagarde warned at the time that she feared a volatile global economy in a “rapidly changing and uncertain world”.

“Policymakers are increasingly grappling with difficult policy trade-offs,” she said. She called on policymakers to take decisions that would spur global demand.

But on January 19th the IMF revised the global growth figures downward by 0.2 per cent for each year – 3.4 for 2016, and 3.6 per cent for 2017.

“Adding to these headwinds are concerns about the global impact of China’s transition to more balanced growth, along with signs of distress in other large emerging markets, including from falling commodity prices,” the report added.

The IMF report reiterated Lagarde’s warning that decision makers should be prepared to make strong policy responses at all levels in order to deal with the new global economic realities and encourage productivity, lending, and consumer confidence.

The BRICS Post with inputs from Agencies

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