IMF may downgrade growth outlook

It forecast that global output would grow by 3.6 per cent in 2014 and 3.9 per cent in 2015

Christine Lagarde: “Potential growth is weaker [and] investment remains lacklustre.” Photograph: Reuters

Christine Lagarde: “Potential growth is weaker [and] investment remains lacklustre.” Photograph: Reuters

Mon, Jul 21, 2014, 01:00

The International Monetary Fund will present its latest World Economic Outlook this Thursday and a downward revision could be coming.

IMF managing director Christine Lagarde has already hinted at a slight cut in the fund’s growth forecasts, saying the global economy should improve over the next 18 months but that growth might not be as fast as previously expected.

“We are seeing global activity pick up, but the momentum could be less robust than expected because potential growth is weaker [and] investment remains lacklustre,” she told the annual Davos meeting in Provence, France.

She said the IMF’s update this week would be “very slightly different” from the forecasts published in April.

In April, the IMF trimmed its outlook for global economic growth, as emerging markets struggled with rising borrowing costs and anaemic output in Europe and Japan weakened recovery.

It forecast that global output would grow by 3.6 per cent in 2014 and 3.9 per cent in 2015.

Deflation threat

At the time, it also identified deflation as one of the biggest threats to Ireland’s economic recovery. The Washington- based fund predicted Irish inflation would be a meagre 0.6 per cent this year, below the euro area average of 0.9 per cent and well inside the ECB’s inflation target of 2 per cent.

On the upside, the IMF predicted the Irish economy would outstrip the euro zone in terms of economic growth, expanding 1.7 per cent this year and 2.5 per cent in 2015, compared with rates of 1.2 per cent and 1.5 per cent in the euro zone as a whole.