Washington – The International Monetary Fund Thursday trimmed the forecast for global economic growth this year to 3.3 percent, mainly due to unexpected output contraction in North America.
In the update to its World Economic Outlook, the IMF expected the global economy to expand at a slower rate than it did in April, dropping from 3.5 percent to 3.3 percent.
One of the unexpected factors is lower growth rate of the U.S. economy in the first quarter due to bad weather, a strong dollar and slowdown at West Coast ports.
“It was an accident,” Olivier Blanchard, the IMF’s chief economist, said in a press conference. “In short, the fundamentals of the U.S. economy are very strong and the recovery is very much in trend.”
Drivers for acceleration in 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 IMF said in the report.
Despite Greece’s debt crisis and recent volatility of the Chinese stock market, the IMF’s expected 3.8 percent growth for 2016 remains unchanged.
“Greece’s economy only represents less than 2 percent of the Eurozone GDP,” Blanchard said. “Of course we continue to hope and we are working on an agreement, which would allow Greece to stay in the eurozone.”
“There is little question that Greece is suffering and may suffer even more under the scenario of a disorderly exit from the eurozone. But the effects on the rest of the world economy are likely to be limited,” Blanchard said.
According to the IMF’s update, positive and negative dynamics outside North America were roughly offsetting. Growth in emerging market and developing economies weakened as expected, while advanced economies are expected to expand 2.1 percent in 2015. The eurozone in particular is doing better, according to Blanchard.
The stock market in China played a smaller role, Blanchard said. “It might have some small impacts on consumption spending, but we don’t see it as a macroeconomic issue.”
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