IMF warns world economy growing too slowly

By Shawn Donnan, Financial Times
The “increasingly disappointing” world economy is facing the threat of a “synchronised slowdown” and mounting risks including another bout of financial market turmoil and a political backlash against globalisation, the International Monetary Fund has warned.

In its semi-annual World Economic Outlook, the IMF on Tuesday reduced its global growth forecast for 2016 by 0.2 percentage points to 3.2 per cent, downgrading its expectations for a wide range of advanced and emerging economies.

IMF MeetingThe IMF said the world economy was increasingly vulnerable to “downside risks” including further market turmoil in the wake of this year’s China-led downturn as well as the political consequences of lacklustre growth since the 2008 global financial crisis.

“Growth has been too slow for too long,” said Maurice Obstfeld, the IMF’s chief economist, warning of a widespread sense that too many people were being left behind.

“Across Europe the political consensus that once propelled the European project is fraying,” he said, arguing that the refugee crisis and recent terrorist attacks had combined with economic pressures, including stagnant wages, to lead to a “rising tide of inward-looking nationalism”.

He cited the “real possibility” that the UK would vote in its June 23 referendum to leave the EU, adding that in the US a backlash against globalisation “threatens to halt or even reverse the postwar trend of ever more open trade”.

In a sign of its concern, the IMF called for policymakers in large economies to identify policies “that could be implemented quickly if there are signs that global downside risks are about to materialise” to prevent a slip back into global recession.

The IMF said that the threat of synchronised slowdown required “bold multilateral actions to boost growth and contain risks at this critical stage of the global recovery”.

Source: FT

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