Economy Watch: IMF Predicts Continued Economic Sluggishness

The modest growth project of 3.2 percent is more or less in line with last year, but uncertainty has increased and the risks of weaker growth scenarios are becoming more tangible.
Credit: International Monetary Fund's World Economic Outlook: Too Slow for Too Long
Credit: International Monetary Fund’s World Economic Outlook, April 2016

Global growth continues, but at a sluggish pace that leaves the world economy more exposed to risks, according to the International Monetary Fund’s latest World Economic Outlook, dated April 2016, which was released on Tuesday. The baseline projection for global growth in 2016 is a modest 3.2 percent, more of less in line with last year, and a 0.2 percentage point downward revision compared to the forecast in the January 2016 World Economic Outlook Update.

The global recovery is projected to strengthen in 2017 and beyond, driven primarily by emerging market and developing economies, as conditions in stressed economies gradually start to normalize, the IMF said. But uncertainty has increased, and risks of weaker growth scenarios are becoming more tangible.

The risks include: a return of financial turmoil, impairing confidence; a protracted period of low oil prices that could further destabilize the outlook for oil-exporting countries; a sharper slowdown in China than currently projected, which could have strong international ramifications through trade, commodity prices, and confidence; and shocks of a noneconomic origin—geopolitical conflicts, political discord, terrorism, refugee flows or global epidemics—that loom over some countries and regions and, if left unchecked, could cramp global economic activity.

In the United States, the organization expected growth this year to come at 2.4 percent, the same as last year, with a modest uptick in 2017. Domestic demand will be supported by improving government finances and a stronger housing market that help offset the drag on net exports coming from a strong dollar and weaker manufacturing.