IMF Sees 2015 Global Economic Growth at Weakest Rate Since Financial Crisis

Those figures are down from the IMF’s April projections for 0.9 percent growth this year and 2 percent next year in Latin America.

Noting the recent volatility in the rupee, Rajan in the biannual Financial Stability Report released last month said: “What we have seen might be only one of a series of such “tantrums” that the global financial markets are likely to witness”.

The institution left unchanged its forecasts for the eurozone at 1.5 per cent, and for the two largest economies: Germany (1.6 per cent) and France (1.2 per cent).

The revision follows the fund slashing the prospects for US growth after a series of negative shocks, such as a strong dollar, bad weather and a collapse in oil-sector investment, sapped momentum for job creation and expansion.

Greece’s crisis is a warning, said Olivier Blanchard, the IMF’s chief economist.

The International Monetary Fund said world growth had been hampered in the first quarter by “unexpected output contraction in the United States” with spillovers into Canada and Mexico.

The International Monetary Fund maintained its forecasts for a pickup in growth in the euro zone, despite Greece moving closer to the edge of default and an exit from the currency bloc as it races to find a last-minute third bailout.

Meantime, America’s first-quarter troubles are pinching its neighbours.

Growth in emerging market and developing economies is projected to slow from 4.6% in 2014 to 4.2% in 2015. It is also below the 3.4 percent growth reached previous year, a sign of challenges weighing down the worldwide economy.

In China, the Shanghai Composite Index has tumbled by around 30 per cent since its June 12 peak, though it is still up 60 per cent from a year ago.

However, most of the projected decline in global growth is actually due to the US economy.

“There is no particular reason to have lost confidence”, because of meltdown, he said in a press conference.

He said Beijing should not try to prop up markets, but said their efforts to ease the pace of the plunge in stocks “may be a good thing”. Although the major indexes have recently eased from record highs, share prices “are approaching levels that may be hard to sustain given profit forecasts”, it said. The finance ministry expects GDP growth to be 8-8.5 percent in 2015-16, while the Reserve Bank of India has estimated it at 7.6 percent.

It also shaved its forecasts for four of the G7 leading industrial countries – the USA, the United Kingdom, Japan and Canada – and said the risks to its forecast were skewed to the downside.