An unexpected decline in output in the United States prompted the International Monetary Fund to lower the global growth forecast for this year. In addition, the organisation warned that the uncertainty in Greece and re-balancing in China pose risks to the outlook.
In the July update to its World Economic Outlook, released Thursday, the Washington-based lender forecast 3.3 percent global growth for this year, which is smaller than the 3.5 percent predicted in April. The global growth projection for next year, however, was maintained at 3.8 percent.
Global growth was 3.4 percent in 2014 and 2.2 percent in the first quarter of this year, the report said.
The distribution of risks to the near-term outlook for global growth is broadly unchanged from the April report and is slightly tilted to the downside, the IMF said.
The report identified lower oil prices as a key upside risk, while highlighted disruptive asset price shifts and a further increase in financial market volatility were still seen as an important downside risk.
“Developments in Greece have, so far, not resulted in any significant contagion. Timely policy action should help to manage such risks if they were to materialize,” the IMF said.
“Nevertheless, recent increases in sovereign bond yields in some euro area economies reduce upside risks to activity in these economies, and some risks of a reemergence of financial stress remain.”
Other risks to the outlook were further appreciation of the U.S. dollar, sluggish growth in output and employment amid low inflation and crisis legacies in advanced economies, and geopolitical tensions in Ukraine, the Middle East and parts of Africa.
The growth forecast for the U.S. economy was sharply cut to 2.5 percent from 3.1 percent. The projection for next year was lowered by 0.1 percentage point to 3 percent.
“The unexpected weakness in North America, which accounts for the lion’s share of the growth forecast revision in advanced economies, is likely to prove a temporary setback,” the IMF said.
