WASHINGTON: The Intern­ational Monetary Fund (IMF) on Thursday trimmed down its global growth forecast for 2015 to 3.3 per cent, citing weaker-than-expected economic activity in North America during the first quarter.

In April, the IMF projected a 3.5pc growth in global economy for this year. The Fund also kept its economic growth outlook for 2016 unchanged at 3.8pc.

In the Middle East and North Africa (MENA) region, which includes both Pakistan and Afghanistan, the updated version of the IMF World Economic Outlook cited “economic distress related to geopolitical factors” for slower growth.

The region that includes Pakistan recorded a 2.4pc growth in 2013, which increased to 2.7pc in 2014, 3.6pc in 2015 and is projected to increase to 3.8pc in 2016.

Compared to them, India recorded a 6.9pc growth in 2013, 7.3pc in 2014, 7.5pc in 2015 and is projected to maintain it in 2016.

Growth in emerging market and developing economies is projected to slow down from 4.6pc in 2014 to 4.2pc in 2015.

“The slowdown reflects the dampening impact of lower commodity prices and tighter external financial conditions … the rebalancing in China, and structural bottlenecks,” the report said.

In 2016, growth in emerging market and developing economies is expected to pick up to 4.7pc, largely because of the projected improvement in economic conditions in a number of distressed economies.

OIL PRICES: The report noted that oil prices had rebounded more than expected in the second quarter of 2015, reflecting higher demand and expectations that oil production growth in the United States will slow faster than previously forecast.

Nevertheless, the average annual oil price expected for 2015 — $59 a barrel — is in line with the oil price assumption in the April 2015 IMF report.

It forecast a smaller increase for 2016 and beyond as global oil supply is running well above 2014 levels and global oil inventories are still rising.

The reduction in oil investment may, however, lead to a somewhat weaker boost to activity in North America from lower oil prices than expected earlier.

The report showed a growth divergence between advanced and developing economies, predicting “a more gradual pickup” in advanced economies than stated in the April 2015 report.

“The underlying drivers for a gradual acceleration in economic activity in advanced economies — easy financial conditions, more neutral fiscal policy in the euro area, lower fuel prices, and improving confidence and labour market conditions — remain intact,” the report said.

“The unexpected weakness in North America, which accounts for the lion’s share of the growth forecast revision in advanced economies, is likely to prove a temporary setback.”

Olivier Blanchard, the IMF’s chief economist, said in prepared remarks that while the IMF left its 2015 forecast for China unchanged at 6.8pc it did so with greater uncertainty.

“The puncture of what had clearly become a stock market bubble may have some limited effect on spending. But, for the moment, the slowdown in growth is primarily led by a slowdown in real estate investment, a development we see as basically desirable,” he said, adding that the IMF expects China’s growth to slow down to 6.3pc next year and to 6pc in 2017.

Mr Blanchard also said that the ongoing situation in Greece, while worrisome, should have a limited effect on the world economy.

“As dramatic as the events in Greece are, Greece accounts for less than 2pc of the eurozone GDP, and less than half a per cent of world GDP,” he said. “There is little question that Greece is suffering and may suffer even more under the scenario of a disorderly exit from the eurozone. But the effects on the rest of the world economy are likely to be limited.”

Published in Dawn, July 10th, 2015

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