The International Monetary Fund downgraded its growth forecasts for the global economy according to a report released today. The IMF said that China’s slowdown and tumbling commodity prices will push global economic growth this year to the lowest level since the recession of 2009 which is being seen as a huge negative by analysts and economists on the street. The IMF said that it believes the global economy would grow at a rate of 3.1 percent as compared to a previous forecast of 3.3 percent. The forecast is also lower than a year ago forecast which had predicted global economy to grow at a pace of 3.4 percent.
The chief economist for the IMF said that there have been more downside risks that have emerged over the last couple of months and therefore the cut in forecasts. Though, the IMF downplayed the risk of a global recession. It is imperative to state that the Federal Reserve last month cited global growth concerns as one of the key reasons for the it to postpone a long anticipated interest rate hike which has been kept near zero ever since December 2008. Many believe that a interest rate hike by the Federal Reserve would be seen as a vote of confidence in the American economy but be a huge negative for emerging market economies.
It was stated in the report that emerging market economies would grow at 4 percent which would mark the fifth straight annual drop. The slowdown in China is having a huge impact on demand for raw materials and has pushed down prices of copper and oil. It was reported earlier last week that the manufacturing activity in the world’s second largest economy continues to show stagnation and has had analysts call for further easing measures by the People’s Bank of China.