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IMF chief: Global growth set to be weaker than expected

By Business Reporters

Published 02/09/2015

Global growth is likely to be weaker than expected this year thanks to a slower recovery in advanced economies
Global growth is likely to be weaker than expected this year thanks to a slower recovery in advanced economies

Global growth is likely to be weaker than expected this year thanks to a slower recovery in advanced economies and a further slowdown in emerging economies, International Monetary Fund chief Christine Lagarde has said.

Ms Lagarde also warned emerging economies to "be vigilant for spillovers" from China's slowdown, tighter global financial conditions, and the prospects of a US interest rate hike.

Her comments came as September opened with a fresh fall in global share prices amid continued investor fears over the slowdown in China on the back of more worrying economic data.

The FTSE 100 Index closed 189.4 points, or 3%, lower at 6058.5 after heavy falls in Asian markets overnight following a Chinese manufacturing report showing activity fell to a three-year low last month.

It wiped about £48bn from the value of FTSE 100 companies.

Sentiment was further hit by dismal manufacturing figures from the US and UK - where the sector saw jobs falling for the first time in more than two years.

Germany's Dax and France's Cac 40 each fell by more than 2% while in New York, the Dow Jones Industrial Average was trading around 2% lower.

In Dublin, the ISEQ was down more than 3% mid morning, falling faster that London or Frankfurt, but it recovered somewhat to close at 6560.5, down 145.6.

The declines come after a dire August for global equities, with the FTSE 100 and Standard & Poor's 500 Index on Wall Street both suffering their worst month since May 2012.

In currencies, sterling was under pressure after the UK's disappointing manufacturing figures for August which suggested growth in the sector slowing.

Ms Lagarde, speaking at a conference in Indonesia, said: "Overall, we expect global growth to remain moderate and likely weaker than we anticipated.

"This reflects two forces: a weaker than expected recovery in advanced economies, and a further slowdown in emerging economies, especially in Latin America," she said. "Asia as a region is still expected to lead global growth. But even here, the pace is turning out slower than expected."

The IMF in July forecast global growth at 3.3% this year, slightly below last year's 3.4%.

Ms Lagarde said China's economy was slowing, although not sharply or unexpectedly, as it adjusts to a new growth model.

"The transition to a more market-based could well be somewhat bumpy," she said. That said, the authorities have the policy tools and financial buffers to manage this transition."

Belfast Telegraph

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