Brics update mixed as Brazil’s expansion rate falls while Russian Federation — International Monetary Fund July WEO

It cut its global growth forecast to 3.3 per cent for 2015 – that’s 0.2 percentage points lower than it predicted in April, although the figure is expected to rise to 3.8 per cent next year. The strong dollar has fomented trouble for many emerging-market economies and companies that borrowed heavily in dollar-denominated debt, and the prospect of higher interest rates amid weak growth have fostered concerns about the ability of many corporations and governments to pay back their obligations.

“A rebound in activity in a number of distressed economies is expected to result in a pickup in growth in 2016”, it said.

“The distribution of risks to global economic activity is still tilted to the downside”.

The World Economic Outlook Update report showed consumer prices among advanced economies standing at zero percent annually, down from 0.4 percent growth estimated in April. “Timely policy action should help to manage such risks if they were to materialize”, it said, noting the recovery in the eurozone seemed “broadly on track”. Growth should speed up to 3.8 per cent next year, it said, unchanged from earlier forecasts.

For 2017, International Monetary Fund forecast a growth rate of 6.0 percent, the official said.

“But, for the moment, the slowdown in growth is primarily led by a slowdown in real estate investment, a development we see as basically desirable”, said Olivier Blanchard, the IMF’s chief economist, at a news conference. The underlying drivers for consumption and investment in the United States-wage growth, labor market conditions, easy financial conditions, lower fuel prices, and a strengthening housing market-remain intact.

The only silver-lining amid global gloom is India’s projected growth rate of 7.5 per cent in both 2015 and 2015, which will be faster than China’s 6.8 and 6.3 per cent respectively.

‘Raising actual and potential output through a combination of demand support and structural reforms continues to be the economic policy priority.’.

“What we know is that mechanical links between Greece and the rest of the world are limited, be it on the trade side or on the finance side”. Additionally, China’s recent stock market crash is contributing to the IMF’s trepidation. The projection for next year was lifted by 1.3 percentage points to 0.2 percent.

Brazil will contract 1.5% in 2015 as per the July update compared to the 1% decline projected in the April forecast.

In advanced economies, the International Monetary Fund advised central banks to keep bolstering activity and push up inflation. Countries with fiscal space should increase spending, especially on infrastructure, while the need for structural reforms remains urgent across the advanced world, the fund said.