The global economy will expand 3.4% this year, down from a projected 3.6% in October. Growth for 2017 has been revised to 3.6% from 3.8%.
According to the report: There are important risks to the outlook, which are particularly prominent for emerging market and developing economies and could stall global recovery.
These risks relate mostly to the ongoing adjustments of the global economy, namely China’s rebalancing, lower commodity prices, and the prospects for the progressive increase in interest rates in the United States. They include the following possibilities:
• A sharper-than-expected slowdown in China, which could bring more international spillovers through trade, commodity prices, and waning confidence.
• A further appreciation of the dollar and tighter global financing conditions which could raise vulnerabilities in emerging markets, possibly creating adverse effects on corporate balance sheets and raising funding challenges for those with high dollar exposures.
• A sudden bout of global risk aversion, regardless of the trigger, could lead to sharp further depreciations and possible financial strains in vulnerable emerging market economies.
• An escalation of ongoing geopolitical tensions in a number of regions, which could affect confidence and disrupt global trade, financial flows, and tourism. New economic or political shocks in countries currently in economic distress which could also derail the projected pickup in activity.
Commodity markets pose two-sided risks. On the downside, further declines in commodity prices would worsen the outlook for already-fragile commodity producers, and widening yields on energy sector debt threaten a broader tightening of credit conditions.
On the upside, the recent decline in oil prices may provide a stronger boost to demand in oil importers, including through consumers’ possible perception that prices will remain lower for longer.
“All in all, there is a lot of uncertainty out there, and I think that contributes to the volatility,” said IMF chief economist Obstfeld. “We may be in for a bumpy ride this year, especially in the emerging and developing world,” he said.
More on this and plenty of other things to discuss today on our weekly webinar.
We will post the recorded version at or about 5pm (EDT) on our website:
So feel free to tune in!!
Scott Tomenson,CIM Managing Partner, Chief Investment Strategist