Up to $3 trillion in over-borrowing in emerging markets

Vinals also identified China’s continued reliance on debt to maintain growth, which could make them vulnerable to further falls in commodity prices and declines in trade.

Vinals said Western economies had shown a few improvement in the previous year, but he put that down to low inflation and a plummet in oil prices.

Among those hardest hit by the commodities bust: The Brazilian economy, forecast to contract by 3 percent this year; and Russia, forecast to shrink 3.8 percent because of lower oil prices and economic sanctions imposed by the West as punishment for Russian aggression in Ukraine. In September, RBI cut its policy interest rate by a bigger-than-expected 50 basis points to a 4-1/2 year low of 6.75 per cent, front-loading monetary easing in an effort to stoke a slowing economy.

The focus on China came in the IMF’s new Global Financial Stability Report which stresses the increased dangers across the emerging markets from slow growth, global market turbulence, and very high levels of corporate borrowing. In 2014, real GDP grew at 3,4 percent.

It estimates that emerging markets and developing economies will only post a combined 4.5 percent growth in 2016, a 0.2 percentage point drop from what was stated in its earlier WEO report, published in April.

“In an environment of declining commodity prices, reduced capital flows to emerging markets and pressure on their currencies, and increasing financial market volatility, downside risks to the outlook have risen, particularly for emerging market and developing economies”, it said.

The developed economies are expected to manage slightly stronger growth than before, reflecting the modest recovery in the eurozone and the return of growth in Japan, though that looks tentative at best.

So the International Monetary Fund is still predicting growth, but it is distinctly lacklustre growth, especially for the current year.

“The “holy grail” of robust and synchronised global expansion remains elusive”, IMF chief economist Maurice Obstfeld said in a statement accompanying the Washington-based fund’s World Economic Outlook. “Regardless of the timing of the initial policy move, the data would suggest that the subsequent rate increases should be gradual”, the International Monetary Fund said. The update warned that advanced economies could slip into “near stagnation” with more declines in growth.