## IMF Survey : Uncertainty, Complex Forces Weigh on Global Growth

_IMF News, October 6, 2015_

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## Bibliographic details
- Published: October 6, 2015

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### Overview
- The IMF’s latest World Economic Outlook (WEO) foresees lower global growth compared to last year, with a modest pickup in advanced economies and a slowing in emerging markets, primarily reflecting weakness in some large emerging economies and oil-exporting countries.
- Global real GDP grew at 3.4 percent last year, and is forecast to grow at only 3.1 percent this year. Growth is expected to rebound to 3.6 percent next year.

### Major forces shaping the outlook
- The WEO identifies at least three powerful forces intersecting in the world economy:
  - China’s economic transformation—away from export- and investment-led growth and manufacturing, in favor of a greater focus on consumption and services.
  - The fall in commodity prices.
  - The impending increase in U.S. interest rates, with potential global repercussions and added uncertainties.
- The WEO notes downside risks to the world economy are more pronounced than a few months earlier.

### Advanced economies: recovery and constraints
- Projected growth in advanced economies:
  - 2 percent this year.
  - 2.2 percent next year.
- Drivers of the current pickup include declining oil prices, accommodative monetary policy, improved financial conditions, and in some cases, currency depreciation.
- Medium-term prospects remain subdued due to:
  - Lower investment.
  - Unfavorable demographics.
  - Weak productivity growth.

### Emerging market and developing economies: slower growth and heterogeneity
- Growth for emerging market and developing economies as a group:
  - 4.6 percent in 2014.
  - Projected 4.0 percent in 2015.
- Factors behind the fifth straight year of slowing growth:
  - Weaker growth in oil exporters.
  - A slowdown in China with less reliance on commodity-intensive investment.
  - Adjustment following credit and investment booms.
  - Weaker outlook for exporters of other commodities, including in Latin America, after declines in export prices.
  - High geopolitical tensions and domestic strife in a number of countries.
- External conditions becoming more difficult:
  - Prospect of rising U.S. interest rates and a stronger dollar has contributed to higher financing costs for some borrowers.
  - China’s slowdown has larger cross-border repercussions than previously envisaged, including weaker commodity prices and reduced imports.
- The projected rebound in 2016 for emerging markets largely reflects:
  - A less deep recession or partial normalization in countries in economic distress in 2015 (including Brazil, Russia, and some countries in Latin America and in the Middle East).
  - Spillovers from stronger pickup in advanced economies.
  - The easing of sanctions on the Islamic Republic of Iran.
- Growth in low-income developing economies:
  - Expected to slow to 4.8 percent in 2015, from 6 percent in 2014.
  - Weak commodity prices and the prospect of tighter global financial conditions are major factors.
  - Some countries (e.g., Kyrgyz Republic, Mozambique) running large current account deficits and vulnerable to external financial shocks.

### Downside risks highlighted by the WEO
- Key risks that could stall global recovery include:
  - Lower oil and other commodity prices, complicating outlook for commodity exporters (examples: Russia, Venezuela, Nigeria).
  - A sharper-than-expected slowdown in China if rebalancing proves more challenging than expected.
  - Disruptive asset price shifts and increased financial market volatility leading to reversal of capital flows in emerging market economies; renewed concerns about China, Greece, sharply lower oil prices, and contagion effects could spark volatility.
  - Further appreciation of the U.S. dollar posing balance sheet and funding risks for dollar debtors, especially in emerging market economies with increased foreign–currency corporate debt.
  - Increased geopolitical tensions in Ukraine, the Middle East, or parts of Africa harming confidence.

### Policy recommendations and priorities
- Raising actual and potential output is the policy priority; this requires a combination of demand support and structural reforms.
- Advanced economies:
  - Continue accommodative monetary policy.
  - Use macroprudential tools to contain financial sector risks.
  - Countries with fiscal space (example: Germany) should use it to boost public investment, especially in quality infrastructure.
  - Structural reforms to strengthen labor force participation, facilitate labor market adjustment, tackle legacy debt overhang, and lower barriers to entry in product markets, especially in services.
- Emerging market and developing economies:
  - Many have increased resilience through greater exchange rate flexibility, higher foreign exchange reserves, increased reliance on foreign direct investment flows and domestic-currency external financing, and stronger policy frameworks.
  - Policymakers face a trade-off between supporting demand amid slowing growth and reducing vulnerabilities; scope for policy easing varies considerably by country.
  - Commodity exporters should adjust to lower commodity-related revenue—gradually if fiscal buffers were built during the commodity boom, and more rapidly otherwise.
  - In commodity-exporting countries with flexible exchange rates, currency depreciation can help offset demand impacts of terms-of-trade losses, but sharp exchange rate changes can exacerbate vulnerabilities from high corporate leverage and foreign currency exposure.
  - Exchange rate policy should consider financial stability; countries also need to diversify their economies through targeted structural reforms to raise productivity and remove bottlenecks to production.

*IMF Survey — October 6, 2015*

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## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [IMF Research](https://www.imf.org/en/news/search)
- [Read WEO report](http://www.imf.org/external/pubs/ft/weo/2015/02/index.htm)
- [Watch Obstfeld interview](http://www.imf.org/external/mmedia/index.aspx)
- [Read blog](http://blog-imfdirect.imf.org/)
- [Wither commodity exporters](http://www.imf.org/external/pubs/ft/survey/so/2015/RES092815A.htm)
- [Exchange rates matter for trade](http://www.imf.org/external/pubs/ft/survey/so/2015/RES092815B.htm)
- [Lagarde calls for policy upgrade](http://www.imf.org/external/pubs/ft/survey/so/2015/NEW093015A.htm)
- [in China](http://www.imf.org/external/pubs/ft/survey/so/2015/car081415b.htm)
- [China](http://blog-imfdirect.imf.org/2015/10/05/managing-chinas-economic-transition/)
- [corporate debt](http://www.imf.org/external/pubs/ft/survey/so/2015/POL092915B.htm)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2015/09/28/04/53/sores100615a_