IMF sharply cuts Thai GDP forecast to 2.5%

In its latest World Economic Outlook, the fund now projects growth at 3.1% for 2015 as a whole, 0.2 percentage point below its forecast in July.

“A return to robust and synchronised global expansion remains elusive”, the report declared, stating that the risks of an outcome worse than its forecasts were more pronounced than they were just a few months ago. They have been hurt by an economic slowdown in China, which has reduced demand for emerging market raw materials and pushed down prices of commodities such as copper and oil.

Bank Mandiri economist Andry Asmoro agreed that both commodity prices and the downturn in China’s economy would overshadow next year’s growth, but maintained that Indonesia’s economy would still improve.

For most other countries the prediction was slashed, with Japan down 0.2 percentage points to 0.6 percent and Germany down 0.1 percentage points to 1.5 percent.

Presenting the report, financial counsellor at IMF, Jose Vinals, said that while financial stability has seen an improvement in advanced economies, emerging and developing economies pose challenges due to their slow economic growth risking the global financial stability. Citing weakness in China and soft commodity prices, the IMF estimated that the world’s economy will grow at 3.1% this year and 3.6% in 2016. The economic growth of the CIS countries will resume starting from 2016, a 0.5 percent growth is expected in 2016 and a 2.5 percent growth is expected in 2020, said the report.

The corporate debt of non-financial firms across major emerging market increases from about $4 trillion (£2.6 trillion) in 2004 to well over $18 trillion in 2014, according to the IMF.

Growth in advanced economies is projected to increase modestly this year and next.

The Chinese central government faces a tough balancing act in preventing a sharp slowdown, reducing vulnerabilities from excess leverage and strengthening the role of market forces in the economy, the IMF said.

But the real policy rate needs to remain tight for inflation to decline to the inflation target in the medium term, given upside risks to inflation, it said. The last three factors are mainly caused by the Federal Reserve’s looming monetary tightening (higher US interest rates).