The International Monetary Fund on Tuesday cut its forecast for economic growth in the USA and other advanced economies while citing increasing risks from isolationist sentiment, but upgraded its outlook for emerging markets.
In its latest World Economic Outlook (WEO) report released yesterday, the multilateral lender said emerging market economies continue to prop up global growth amid continued softness in activity among advanced economies.
The IMF also urged Chinese leaders to speed up vital reforms or risk a painful correction, adding that Beijing's "unsustainably high" growth goals were adding to the problem.
The United States accounts for much of the decline in advanced economies, with a reduction to 1.6 per cent growth from 2.2 per cent forecast in July, due to a disappointing first-half performance caused by weak business investment and a draw-down of goods inventories.
The IMF report also mentioned that "anti-immigrant and anti-trade rhetoric have been prominent from the start of the current [U.S.] presidential election round", and that there has been "pressure to adopt populist, inward-looking policies" around the world.
The IMF increased its 2016 growth forecasts for the Islamic republic to 4.5 percent, from 4.0 percent in April. Although China's economy continues to grapple with a challenging shift in focus from investment to consumption, concerns about the country's near-term prospects have eased following the government's decision to keep interest rates low and strong credit growth, the International Monetary Fund said.
The IMF said it expected growth of 6.6 percent in 2016 - the same as its forecast in July - slowing to 6.2 percent in 2017 "absent further stimulus". The IMF hiked its 2016 forecast from 0.3 to 0.5 per cent, and for next year from 0.1 to 0.6 per cent.
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However, slower growth in developed nations is being offset by slightly faster improvements in emerging economies, the International Monetary Fund said. "By contrast, several of the region's non resource exporters, including Côte d'Ivoire, Ethiopia, Kenya, and Senegal, are expected to continue to grow at a robust pace of more than 5 percent this year".
Obstfeld said the Brexit vote left unclear the future shape of the UK's trade and financial relations with the other 27 European Union member states, with a likely impact on investment and hiring across Europe.
China's total debt hit 168.48 trillion yuan ($25 trillion) at the end of past year, equivalent to 249 percent of national GDP, the Chinese Academy of Social Sciences, a top government think tank, has estimated.
The IMF says slow growth in advanced nations has sparked a political movement that blames economic troubles on globalization.
The report said that a stagnating global economy and the "precarious nature" of the recovery from the 2008 financial crisis risked policies that "would hamper productivity, growth and innovation".
The move marks a reversal of course from the IMF's dire predictions ahead of the Brexit vote back in June.
The IMF had warned that the so-called Brexit could depress growth in the United Kingdom for years. The American economy grew 2.6 percent in 2015.