IMF: The world is close to recession - but UK and US to lead the way on growth as emerging markets struggle

 
Chris Papadopoullos
Follow Chris
The IMF, led by Christine Lagarde, said emerging market economies will lag behind (Source: Getty)

The world is perilously close to entering a recession again this year and the next, according to the new forecasts from the International Monetary Fund (IMF).

The IMF has cut its forecast for global growth by 0.2 percentage points for 2015 and 2016, to 3.1 per cent and 3.6 per cent respectively, with most of the weakness coming from emerging markets such as China and Brazil.

When the 2008-9 recession happened, the IMF considered global growth of below three per cent to be recession territory.

But the organisation said the UK and the US will lead economic growth among the major developed nations this year and in 2016, unfazed by recent turmoil in financial markets and slower growth in developing countries.

Growth of 2.5 per cent is expected in the UK this year, the IMF said, up from 2.4 per cent in July. The US is expected to grow a little faster at 2.6 per cent. The organisation said advanced economies were expected to see growth pick up, notably in Japan and the Eurozone, while developing countries were expected to slow.

In contrast, falls in commodity prices this year will weigh on the growth of emerging markets. This also creates other risks, the IMF believes, because weaker currencies for these countries will make any debts they have in dollars more difficult to repay. A further weakening in the outlook for China would exacerbate these problems, the IMF said.

The IMF’s forecasts for emerging market growth this year have been taken down a notch to four per cent, from 4.2 per cent.

Related articles