IMF Forecast

• 04.15.2015, 15:44
•  World,  Analytics

The result of a survey done by International Monetary Fund (IMF) shows that the global economic growth will not be in the same level for every one. It will be stronger in advanced economics and lower in emerging markets. According to the estimations macro risks decreased, but financial and geopolitical risks increased.

The overall global growth is forecast 3.5 percent for 2015 and almost the same for 2016 -3.8 percent. IMF Economic Counselor and Director of Research Oliver Blanchard said: "Legacies of both the financial and the euro area crises—weak banks and high levels of public, corporate, and household debt—are still weighing on spending and growth in some countries. Low growth in turn makes deleveraging a slow process." He also added that the main reason of lower potential growth in advanced and emerging economies is the combination of population aging, lower investment and slow- moving productivity. These all bring to lower spending and finally to lower growth.

According to IMF the main forces behind the low economic growth are the decline in the oil prices and exchange rate movements. These are creators of winners and losers in the global economy. On the shadow of low oil prices forecast for advanced economies is increase of output to 2.4 percent from 1.8 percent. Projected growth for US is 3 percent. The growth is supported by net exports from recent dollar appreciation. The growth in euro area shows positive sign due to lower oil prices, low interest rates and weaker euro. The growth in Japan is also based on lower oil prices and weaker yen.

Despite economic gains for advanced markets emerging and developing markets have losses. Only the slow growth in these markets does not apply to India. Growth is forecasted to slow from 4.6 percent last year to 4.3 percent in 2015. The drop of oil price sharply slow down the economy of oil exporting countries- for instance Russia, Iran and many non- OPEC countries. Slowdown of investment harms China’s economy. Latin America also has very weakened outlook due to lower commodity prices.

Changes in the global market can have the same time positive and negative effects on the different countries. As it is mentioned above low price of oil for some countries give advantage to reduce energy expenses and instead to boost the industry, but for oil exporting countries it is reduction of incomes. The same phenomenon works for US dollar. The appreciation of dollar has negative impact for the countries, whose trade relations are based on dollar in terms of import. The risks of geopolitical tensions around the world have also unwanted effects on the global economy.

Overall estimation shows that both markets emerging and developing economies and advanced economies need to set new reform projections according to the global market new requirements. Reforms concerned to education, labor and product markets in emerging and developing countries. And reform toward infrastructure investments in advanced economies.