The International Monetary Fund (IMF) has downgraded its baseline projection for global growth to a “modest” 3.2 per cent in 2016.
In its latest world economic report titled Too Slow for Too Long, the IMF downgraded its 2016 forecast for global growth by 0.2 per cent to 3.2 per cent.
In a press briefing commenting on the outlook, IMF economic counsellor Maury Obstfeld said global growth continues at a “disappointing pace that leaves the world economy more exposed to negative risks”.
The report indicated that macroeconomic realignments, such as the rebalancing in China and a further decline in commodity prices, are affecting growth prospects across countries and regions.
Non-economic factors including “geopolitical tensions and political discord” are also driving uncertainty across global markets.
“On the whole, they are consistent with a subdued outlook for the world economy, but risks of much weaker global growth have also risen,” the report said.
Global growth is expected to pick up to 3.5 per cent in 2017, however, this is still a downward revision from the IMF’s October 2015 forecast. As at October 2015, the IMF expected global growth to come in at 3.8 per cent.
According to the report, the improved outlook for global growth in 2017 is likely to be driven by a stronger performance in emerging market economies.
For Australia, the report indicated that growth will remain “below potential” at 2.5 per cent for 2016. It is, however, expected to rise “above potential” over the next two years to 3 per cent. According to the report, the improvement will likely be driven by a more competitive currency.
By 2021, the report said global growth is projected to increase to just below 4 per cent.
However, this realisation is reliant on “important assumptions” such as a successful rebalancing of China's economy, resilient growth in other emerging market economies, a gradual normalisation of conditions in several economies now “under stress” and a pick-up in activity in commodity exporters.