IMF released World Economic Outlook April 2015 Update

Global growth is forecasted at 3.5 percent in 2015 and 3.8 percent in 2016 which is in line with forecasts made in the January 2015 WEO Update.

Created On: Apr 15, 2015 17:27 ISTModified On: Apr 15, 2015 17:38 IST

International Monetary Fund (IMF) on 14 April 2015 released World Economic Outlook (WEO) April 2015 Report. The report is titled Uneven Growth: Short-term and Long-term Factors.

Global growth is forecasted at 3.5 percent in 2015 and 3.8 percent in 2016 which is in line with forecasts made in the January 2015 WEO Update. Also the global growth rate in 2015 is broadly same as it was in 2014.

Growth in advance economies will rebound

•Global growth in 2015 will be driven by a rebound in advanced economies supported by the decline in oil prices.
•In advanced economies, growth is projected to strengthen in 2015 relative to 2014, but in emerging market and developing economies it is expected to be weaker.
•Growth in the United States is projected to exceed 3 percent in 2015–16. Domestic demand will be supported by lower oil prices, more moderate fiscal adjustment, and continued support from an accommodative monetary policy stance.

•Report projected that after a disappointing 2014, a weaker Chinese Yen and lower oil prices are expected to lead to a pickup of growth in Japan.

Emerging and developing economies will slow

•Growth forecasts for most emerging and developing economies (with the important exception of India) are slightly worse. Growth is projected to slow from 4.6 percent in 2014 to 4.3 percent in 2015. This reflects a variety of factors.
•Oil price declines will sharply slow growth for oil exporters, especially those that also face difficult initial conditions —for example, geopolitical tensions in the case of Russia.
•The Chinese authorities’ emphasis on reducing vulnerabilities from recent rapid credit and investment growth will likely cause a further slowdown in investment, particularly in real estate.
•Latin America’s outlook will continue to weaken due to lower commodity prices. Brazil’s outlook is also affected by a drought, tighter macroeconomic policies, and weak private sector sentiment.
•Growth in low-income countries as a group, however, has stayed high. Growth is expected to slow only slightly to 5.5 percent in 2015, from 6 percent in 2014, and then to rebound in 2016, partly thanks to increased external demand from advanced economy trading partners.

Raising growth still a priority

•In many advanced economies, accommodative monetary policy remains essential to support economic activity and lift inflation expectations.
•In many emerging market and developing economies, there is only limited macroeconomic policy space to support growth.
•In oil importing countries lower oil prices will reduce inflation pressure and external vulnerabilities, and in economies with oil subsidies, the lower prices may provide room to strengthen fiscal positions.
•Oil exporting countries, on the other hand, have to absorb the terms-of-trade shock and face greater fiscal and external vulnerabilities.
•Emerging market and developing economies also have an important structural reform agenda. These economies can reap productivity gains by easing limits on trade and investment, removing infrastructure bottlenecks and improving business conditions.

Projection about India

•India’s growth is projected to strengthen from 7.2% in 2014 to 7.5 % in 2015 and 2016.
•For the first time since 1999, India’s growth rate may eclipse China’s and there is increasing divergence in the growth paths of the two countries.
•India is trying to shift from consumption to investment led growth at a time when China is going opposite way.

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