The International Monetary Fund has warned of the risk of political isolationism, notably Britain’s possible exit from the European Union, and growing economic inequality as it cut its global growth forecast for the fourth time in a year.
In the run-up to its spring meetings in Washington this week, the IMF said on Tuesday that chronic weakness had left the global economy vulnerable to shocks such as sharp currency devaluations and worsening geopolitical conflicts.
In its latest World Economic Outlook, the IMF forecast global growth of 3.2 per cent this year, compared to a downwardly revised forecast of 3.4 per cent in January.
The growth estimate also was lowered in July and October of last year.
For 2017, the IMF said the global economy would grow 3.5 per cent, down 0.1 percentage point from its January estimate.
Its latest report cited a worsening spillover from China’s economic slowdown as well as the impact of low oil prices on emerging markets such as Brazil.
It also highlighted persistent economic weakness in Japan, Europe and the United States.
The gloomier picture sets the stage for the IMF and the World Bank to call this week for more co-ordinated global action to support growth.
“In brief, lower growth means less room for error,” IMF’s chief economist, Maurice Obstfeld, told a news conference, adding that “scarring effects” from years of tepid growth could in turn weaken demand, thin the workforce and reduce potential output further, creating a scenario of “secular stagnation”.
In its report, the IMF warned that the rise of nationalist parties in Europe, the June 23 `Brexit’ referendum, and anti-trade rhetoric in the US presidential campaign posed threats to the global economic outlook.