IMF expected to cut growth forecasts in latest outlook

Christine Lagarde warns global economy has lost momentum and recovery too slow

The International Monetary Fund will sound fresh alarm over the state of the global economy this week when it reveals its latest forecasts for growth against a backdrop of slower world trade and jittery financial markets.

The IMF's latest update is expected to reprise warnings about risks from a slowdown in emerging market economies, China's downturn and lower commodity prices. It cut its outlook in January and recent downbeat comments from its managing director, Christine Lagarde, were taken by many as a hint that more cuts are to come in Tuesday's World Economic Outlook.

Lagarde said in a speech that the global economy had lost momentum and that “the recovery remains too slow, too fragile, and risks to its durability are increasing”. She also called on governments to pursue more growth-friendly policies.

"Given comments from Christine Largarde recently, a downgrade to the IMF's world growth forecasts looks to be on the cards," said Ryan Djajasaputra, an economist at the bank Investec.

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The new economic outlook, published ahead of the IMF and World Bank spring meetings later in the week, is also likely renew its warnings about risks to the global economy from expected moves by the US Federal Reserve to lift interest rates back to more normal levels.

Risks to predictions

In January, the IMF forecast world output would grow 3.4 per cent this year and 3.6 per cent in 2017. That was 0.2 percentage points lower than forecasts made just three months earlier, and the fund said that the risks to its predictions were to the downside.

The new outlook will also include forecasts for individual countries. The IMF has recently highlighted Britain’s relatively strong recovery, but has expressed concern about the economic impact of June’s EU referendum.

The expected warning over risks to financial stability and economic growth will underscore fears in the UK that its own economy has slowed in recent months, unable to shake off global pressures. A report from the British Chambers of Commerce (BCC) on Monday points to low business confidence and a weaker sales performance across UK manufacturing and services companies.

The BCC said its survey of more than 8,500 firms suggested that growth in the UK economy waned in the first quarter.

Several key indicators for the services sector – the UK’s main driver of economic growth – fell slightly, with domestic sales and orders reaching their lowest level for more than three years, the business group said. For manufacturing, domestic sales growth also weakened.

– Guardian