Uncertainty, Complex Forces Weigh on Global Growth

Global growth moderate and uneven, forecast at 3.1 percent this year, 3.6 percent in 2016

Disparate fortunes between the advanced and emerging market and developing economies

Lower commodity prices weigh on commodity exporters

“Six years after the world economy emerged from its broadest and deepest postwar recession, the holy grail of robust and synchronized global expansion remains elusive,” said Maurice Obstfeld, the IMF Economic Counsellor and Director of the Research Department.

“Despite considerable differences in country-specific outlooks, the new forecasts mark down expected near-term growth marginally but nearly across the board. Moreover, downside risks to the world economy appear more pronounced than they did just a few months ago,” Obstfeld said.

Global real GDP grew at 3.4 percent last year, and is forecast to grow at only 3.1 percent this year. Growth is expected to rebound to 3.6 percent next year (see table).

These forecasts reflect a world economy that is at the intersection of at least three powerful forces, Obstfeld noted. First, China’s economic transformation—away from export- and investment-led growth and manufacturing, in favor of a greater focus on consumption and services; second, and related, the fall in commodity prices; and third, the impending increase in U.S. interest rates, which can have global repercussions and add to current uncertainties.

In this global environment, with the risk of low growth for a long time, the WEO underlines the need for policymakers to raise actual and potential growth.

Recovery in advanced economies on course

Growth in advanced economies is projected to increase modestly to 2 percent this year and 2.2 percent next. This year’s pickup reflects primarily a strengthening of the modest recovery in the euro area and a return to positive growth in Japan, supported by declining oil prices, accommodative monetary policy, and improved financial conditions, and in some cases, currency depreciation.

While growth is expected to increase in 2016, especially in North America, medium-term prospects remain subdued, reflecting a combination of lower investment, unfavorable demographics, and weak productivity growth.

Slower growth in emerging and developing economies

Growth prospects in emerging markets and developing economies vary across countries and regions. But the outlook in 2015 is generally weakening, with growth for these economies as a group projected to decline from 4.6 percent in...