2016 to test mettle of economies
IMF lowers Middle East growth forecast; advanced nations to see modest recovery.
The International Monetary Fund on Tuesday revised down the Middle East growth forecast to 3.6 per cent for 2016 from its previous forecast of 3.9 per cent in October 2015.
The region's growth is projected to be the same 3.6 per cent in 2017 as well, the Washington-based lender said in its latest World Economic Outlook.
Saudi growth seen to hit 14-year low
Saudi arabia is expected to witness its lowest growth rate since 2002 during this year on dramatic fall in oil prices, according to projections of the International Monetary Fund and HSBC Holdings released on Tuesday. The world's largest oil exporter's growth will slow down to 1.2 per cent in 2016, the fund said in its updated outlook. Last October, it predicted 2.2 per cent growth for the kingdom in 2016. The IMF also projected growth in 2017 to be a modest 1.9 per cent, down one percentage point from its October forecast. In 2009, Saudi arabia's economy contracted by 2.1 per cent due to the sharp fall in crude oil prices in the wake of global financial crisis. The kingdom's economy, which heavily dependent on oil revenues, grew by 3.4 per cent in 2015, according to the IMF.
The fund also cut the global growth forecast to 3.4 per cent in 2016 and 3.6 per cent in 2017. Emerging market and developing economies are facing increased challenges and key risks are related to China's slowdown, stronger dollar, geopolitical tensions and renewed global risk aversion.
Advanced economies will see a modest recovery, while emerging market and developing economies face the new reality of slower growth, according to the outlook.
India and parts of emerging Asia are bright spots, projected to grow at a robust pace.
The IMF kept India's growth projection unchanged at 7.3 per cent for this year and 7.5 per cent in the next year. The fund maintained its previous China growth forecasts of 6.3 per cent in 2016 and six per cent in 2017.
"This coming year is going to be a year of great challenges and policymakers should be thinking about short-term resilience and the ways they can bolster it, but also about the longer-term growth prospects," Maurice Obstfeld, IMF economic counsellor and director of research, said in a statement.
"Those long-term actions," he added, "will actually have positive effects in the short run by increasing confidence and increasing people's faith in the future."
Emerging market and developing economies are now confronting a new reality of lower growth, with cyclical and structural forces undermining the traditional growth paradigm, IMF Managing Director Christine Lagarde pointed out in a recent speech.
Growth forecasts for most emerging market and developing economies reveal a slower pickup than previously predicted. Growth is projected to increase from 4 per cent in 2015 - the lowest rate since the 2008-09 financial crisis - to 4.3 and 4.7 per cent in 2016 and 2017, respectively. But these overall numbers fail to do full justice to the diversity of situations across countries.
Latin America and the Caribbean will again see a contraction in 2016, reflecting the recession in Brazil and economic stress elsewhere in the region, even as most other countries in the region will continue to grow. Emerging Europe is expected to grow at a steady pace. Most countries in sub-Saharan Africa will see a gradual pickup in growth.
Growth in advanced economies is projected to rise to 2.1 per cent and to hold steady in 2017, a slightly weaker pickup than that forecast in October.
Overall activity remains robust in the United States. But there are also challenges stemming from the strength of the dollar.
In the euro area, stronger private consumption supported by lower oil prices and easy financial conditions is outweighing a weakening of net exports.
Growth in Japan is also expected to firm up in 2016, on the back of fiscal support, lower oil prices, accommodative financial conditions, and rising incomes.
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