IMF trims projection for world economic growth

MANILA, Philippines – The International Monetary Fund (IMF) cut its projection for world economic growth as global activity slowed in the first quarter.

World output forecast has been reduced by 0.1 percent to 3.6 percent this year from the October figure, while the 2015 projection was slashed by 0.1 percent to 3.9 percent.

“The latest incoming data suggest a slight moderation in global growth in the first half of 2014,” the IMF said in its latest World Economic Outlook report.

“The stronger-than-expected acceleration in global activity in the latter part of 2013 was partly driven by increases in inventory accumulation that will be reversed. Overall, however, the outlook remains broadly the same as in the October 2013 WEO,” the Fund continued.

The IMF reiterated advanced economies will continue to be the main drivers of global growth despite their recoveries being uneven.

For instance, growth in the United States is seen rising above trend amid supportive monetary conditions, while expansion in core euro area economies is seen close to their growth trend.

Growth in emerging market economies, meanwhile, is seen picking up “modestly.”

“These economies are adjusting to a more difficult external financial environment in which international investors are more sensitive to policy weakness and vulnerabilities given prospects for better growth and monetary policy normalization in some advanced economies,” the IMF explained.

Downside risks to the global growth continue to outnumber upside risks seen in a number of advanced economies, the Fund said.

“In advanced economies, major concerns include downside risks from low inflation and the possibility of protracted low growth, especially in the euro area and Japan. While output gaps generally remain large, the monetary policy stance should stay accommodative, given continued fiscal consolidation,” the IMF said.

“In emerging market economies, vulnerabilities appear mostly localized. Nevertheless, a still-greater general slowdown in these economies remains a risk, because capital inflows could slow or reverse,” the Fund continued.

IMF further said: “Emerging market and developing economies must therefore be ready to weather market turmoil and reduce external vulnerabilities.”

The IMF in March hiked its forecast for Philippine economic growth to 6.5 percent from a January projection of 6.3 percent.

Despite the upgrade, the figure remains at the low end of the Philippine government’s 6.5 to 7.5 percent target growth. –Kathleen A. Martin (The Philippine Star)