The International Monetary Fund said Thursday it has trimmed down its expected global growth for 2015 to 3.3 percent, citing weaker-than-expected economic activity in North America during the first quarter. (Tweet This)
In April, the organization said its global growth projection for this year was at 3.5 percent.
Other factors contributing to the IMF’s downward revision include a rebound in oil prices, rising bond yields and weak inflation, it said the latest edition of its World Economic Outlook.
“Oil prices have rebounded more than expected in the second quarter of 2015, reflecting higher demand and expectations that oil production growth in the United States will slow faster than previously forecast,” the IMF said.
U.S. crude prices were up nearly 3 percent in morning trade.
“Nevertheless, the average annual oil price expected for 2015—US$59 a barrel—is in line with the oil price assumption in the April 2015 WEO, with a somewhat smaller increase forecast for 2016 and beyond…” the report said.
The IMF also kept its economic growth outlook for 2016 unchanged at 3.8 percent.
“The underlying drivers for a gradual acceleration in economic activity in advanced economies—easy financial conditions, more neutral fiscal policy in the euro area, lower fuel prices, and improving confidence and labor market conditions—remain intact,” the report said.
The report also noted a growth divergence between advanced and developing economies, adding it expects ” a more gradual pickup than was forecast in the April 2015 WEO” among advanced economies, while growth in emerging markets is expected to slow down.
“The unexpected weakness in North America, which accounts for the lion’s share of the growth forecast revision in advanced economies, is likely to prove a temporary setback.”
The IMF also said the U.S.’ underlying drivers for acceleration in consumption remain intact.
Regarding the slower growth in emerging markets and developing economies, the IMF stated:
“The slowdown reflects the dampening impact of lower commodity prices and tighter external financial conditions—particularly in Latin America and oil exporters, the rebalancing in China, and structural bottlenecks, as well as economic distress related to geopolitical factors—particularly in the Commonwealth of Independent States and some countries in the Middle East and North Africa.”
Olivier Blanchard, the IMF’s chief economist, said in prepared remarks that, while the IMF left its 2015 forecast for China unchanged at 6.8 percent, it did with greater uncertainty.
“The puncture of what had clearly become a stock market bubble may have some limited effect on spending. 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,” he said, adding that the IMF expects China’s growth to slow down to 6.3 percent next year and to 6 percent in 2017.
Blanchard also said that the ongoing situation in Greece, while worrisome, should have a limited effect on the world economy.
“As dramatic as the events in Greece are, Greece accounts for less than two percent of the euro zone GDP, and less than one half of one percent of world GDP,” he said. “There is little question that Greece is suffering and may suffer even more under the scenario of a disorderly exit from the euro zone. But the effects on the rest of the world economy are likely to be limited.”