The world’s just a little gloomier than expected.
So says the International Monetary Fund ( IMF), which has cut global economic forecasts for 2015 and 2016 by 0.3%. The IMF now expects growth to be 3.5% this year, and 3.8% in 2016.
The IMF’s report attributed the projection to “a reassessment of prospects in China, Russia, the euro area, and Japan as well as weaker activity in some major oil exporters”, going on to note that “the United States is the only major economy for which growth projections have been raised”.
“The downgrade to the forecasts comes despite one major boost for the global economy,” said the BBC, “the sharp fall in oil prices, which is positive for most countries.”
The IMF’s growth forecast for the UK remained unchanged at 2.7% in 2015.
What does this mean?
The IMF’s report is based in part on the assumption that the European Central Bank (ECB) will announce a programme of quantitative easing on Thursday. The fund has repeatedly advocated quantitative easing (QE) as a means of boosting the eurozone economy.
“Buying sovereign assets, in proportion to ECB capital key, would reduce government bond yields, induce higher equity and corporate bond values” said an IMF report in July 2014 ultimately raising demand and inflation expectations across the euro area.”
Yet despite the potential benefits of QE, the IMF still gives global growth the thumbs down.
What next?
Willem Buiter, chief economist at Citi and a former UK interest-rate setter, said that the chances of a QE announcement this week are “highly likely, almost certain”.
All eyes on Draghi.