IMF Cuts Global Growth Forecast Amid Uncertainty in U.S.
The International Monetary Fund cut its global outlook for this year and next, warning that a U.S. government default could seriously damage the world economy, Bloomberg News reported.
The IMF said in its World Economic Outlook, growth worldwide will be 2.9% this year and 3.6% from a previously estimated 3.1% and 3.8% respectively.
The forecast factors in a short federal government shutdown and an agreement on the debt-limit before an Oct. 17 deadline, but the IMF warned a default could harm the global economy, Bloomberg reported.
鈥淭he effects of any failure to repay the debt would be felt right away, leading to potentially major disruptions in financial markets, both in the U.S. and abroad,鈥 IMF Chief Economist Olivier Blanchard told Bloomberg.
鈥淲e see this as a tail risk, with low probability. But were it to happen, it would have major consequences,鈥 he said.
The IMF expects growth in emerging economies to increase 4.5% this year, 0.5% less than it forecast three months ago.
鈥淎dvanced economies are gradually strengthening鈥 while 鈥済rowth in emerging-market economies has slowed,鈥 Blanchard wrote in the report.
鈥淭his confluence is leading to tensions, with emerging-market economies facing the dual challenges of slowing growth and tighter global financial conditions,鈥 he wrote.
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