Global economic growth is likely to be weaker than earlier expected, the head of the IMF said yesterday, due to a slower recovery in advanced economies and a further slowdown in emerging nations.
IMF managing director Christine Lagarde said emerging economies such as Indonesia should “be vigilant for spillovers” from China’s slowdown, tighter global financial conditions, and the prospects of a US interest rate hike.
“Overall, we expect global growth to remain moderate and likely weaker than we anticipated last July,” Lagarde told university students at the start of a two-day visit to the Indonesian capital.
Photo: Reuters
The IMF in July forecast global growth of 3.3 percent this year, slightly below last year’s 3.4 percent.
Lagarde said China’s economy was slowing, although not sharply or unexpectedly, as it adjusts to a new growth model.
“The transition to a more market-based economy and the unwinding of risks built up in recent years is complex and could well be somewhat bumpy,” she said. “That said, the authorities have the policy tools and financial buffers to manage this transition.”
“We at the IMF are convinced that Indonesia is better prepared than ever before to face global economic headwinds,” Lagarde told reporters at a joint press briefing with Indonesian President Joko Widodo.
Lagarde said earlier yesterday that Southeast Asia’s largest economy had the “right tools to actually react” to the global volatility, as it had sound public finances and a relatively small deficit.
However, she said greater resilience would be needed from emerging economies to handle China’s slowdown, as the road ahead could be “somewhat bumpy.”
A slump in Chinese demand for commodities has hammered these up-and-coming economies and their currencies, while a recent rout on Chinese stock markets and the shock devaluation of the yuan has only added to their woes.
The IMF still expects Asia to lead global growth, but Lagarde admitted the pace was slower than expected and could further lag.
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