Who: IMF’s World Economic Outlook October 2015 Update
When: 6 October 2015
International Monetary Fund (IMF) on 6 October 2015 released World Economic Outlook (WEO) October 2015 Update titled Adjusting to Lower Commodity Prices.
The report projects global growth for 2015 at 3.1 percent, which is 0.3 percentage point lower than in 2014, and 0.2 percentage point below the forecasts in the July 2015 World Economic Outlook (WEO) Update.
India’s growth is expected to strengthen from 7.3 percent 2015 and last year to 7.5 percent in 2016. Also, Domestic demand in India is projected to remain strong.
Global Outlook for 2015-16
• Global growth is projected to decline from 3.4 percent in 2014 to 3.1 percent in 2015, before picking up to 3.6 percent in 2016
• The decline in growth in 2015 reflects a further slowdown in emerging markets, partially offset by a modest pickup in activity in advanced economies—particularly in the euro area. This pickup, supported by the decline in oil prices and accommodative monetary policy, will modestly narrow output gaps.
• The decline in growth in emerging markets, for the fifth year in a row, reflects a combination of factors and they are
a) Weaker growth in oil exporters
b) Slowdown in China
c) The pattern of growth becomes less reliant on investment
d) Weaker outlook for exporters of other commodities, including in Latin America, following price declines
• The sizable pickup in projected 2016 growth reflects stronger performance in both emerging market and advanced economies.
• Among emerging market and developing economies, growth in countries in economic distress in 2015 including Brazil, Russia, and some countries in Latin America and in the Middle East, while remaining weak or negative, is projected to be higher than in 2015. Domestic demand in India is projected to remain strong.
• These developments more than offset the projected continuation of the slowdown in China. Among advanced economies, higher growth reflects a strengthening recovery in Japan, the United States, and the euro area, as output gaps gradually close.
• Inflation is projected to decline in 2015 in advanced economies, reflecting primarily the impact of lower oil prices.
• The pass-through of lower oil prices into core inflation is expected to remain moderate, in line with recent episodes of large changes in commodity prices.
• In emerging market and developing economies, the inflation rate is projected to increase in 2015, but this reflects the sharp increase in the inflation forecast for Venezuela (more than 100 percent in 2015) and Ukraine (about 50 percent).
• Excluding these countries, inflation in emerging market and developing economies in 2015 is projected to decline from 4.5 percent in 2014 to 4.2 percent in 2015.
• In advanced economies, inflation is projected to rise in 2016 and thereafter, but to remain generally below central bank targets.
• In emerging market and developing economies, inflation is projected to decline in 2016, with markedly lower inflation in countries that experienced sizable depreciation in recent months, such as Russia and to a lesser extent Brazil.
External Sector Developments
• World trade growth is projected to remain modest, as in the past two years.
• A pickup in trade is forecast for advanced economies.
• For emerging markets import growth is projected to decline further, reflecting weakening domestic demand and depreciating exchange rates, but export growth is projected to increase, sustained by higher oil exports from the Middle East and the pickup of domestic demand in advanced economies.
Projection about India
Growth in India is expected to rise above the rates in other major emerging market economies.
India’s growth is expected to strengthen from 7.3 percent 2015 and last year to 7.5 percent in 2016. Growth will benefit from recent policy reforms, a consequent pickup in investment, and lower commodity prices.
On inflation, the report said in India, inflation is expected to decline further in 2015, reflecting the fall in global oil and agricultural commodity prices.
Risks to the Global Outlook
The distribution of risks to global growth remains tilted to the downside. Compared to the risk assessment in the April 2015 WEO, downside risks to growth for emerging market and developing economies have increased. These downside risks are
• Risks from China’s growth transition
• More protracted commodity market rebalancing
• Increased foreign-currency exposure of corporate balance sheets
• Capital flow reversals associated with disruptive asset price shifts
• A Further Sizable Strengthening of the U.S. Dollar
• Geopolitical Risks
In advanced economies, contagion risks from Greece related events to other euro area economies, while lower than earlier in the year, remain a concern, as do risks from protracted weak demand and low inflation.
Oil price declines since June (and lagged effects from previous declines) could imply some upside risk to domestic demand and growth in oil importers.