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IMF Chief Signals Slight Downgrade to Global Growth OutlookTuesday, July 08, 2014 > 12:29:52
International Monetary Fund Managing Director Christine Lagarde indicated a slight reduction to the institution's global growth outlook as investment remains subdued.
The global economic outlook to be released later this month would be "slightly different" from previous forecasts, Lagarde said at the Cercle des Economists conference in Aix-en-Provence, France on Sunday. Nonetheless, she said the global activity is expected to gain momentum in the second half of the year and to accelerate further in 2015 after an unexpectedly weak start to 2014.
In April, the Washington-based lender projected 3.6% growth for 2014 and 3.9% growth for 2015.
Citing investment shortfalls in virtually all countries, Lagarde said public investment took a hard hit during the sovereign debt crisis in many economies, and private investment has not crowded in.
According to Lagarde, public cutbacks in investment are likely to hold back growth prospects. In the emerging market and developing economies, infrastructure constraints are already hurting growth. However, accommodative monetary polices are helping to reduce cost of capital.
IMF Chief expects a meaningful rebound in U.S. activity after a more disappointing first quarter. At the same time, the euro area is slowly emerging from recession, but the recovery is not strong enough to reduce unemployment and debt, she noted.
In Japan, Lagarde said greater structural and fiscal reforms are still needed for growth to be sustained.
Although the growth in many of the emerging markets and developing economies hit a soft patch earlier this year, in part due to weaker exports, these countries will continue to provide the bulk of global growth, albeit at a slower pace than before, Lagarde said.
Further, she cited three major risks looming on the horizon for the global economy. Low inflation particularly in the euro area, renewed market volatility in emerging markets, and high debt levels in many economies.
"On balance, global activity is strengthening – but could be weaker than we had expected, as potential growth is lower and investment remains depressed, she said.