Via the FT:
The head of International Monetary Fund has warned of “disappointing and uneven” global growth, with emerging economies set to see their fifth consecutive year of slowing expansion amid a prolonged period of low commodity prices.
Christine Lagarde warned that worldwide expansion will fall short of last year’s figures and that there will be only a modest expansion in 2016, reports Sam Fleming in Washington.
Addressing an audience in Washington DC ahead of meetings in Lima, Peru next week, Ms Lagarde added that the Federal Reserve face a delicate balancing act as it weighs when to lift interest rates.
“Rising U.S. interest rates and a stronger dollar could reveal currency mismatches, leading to corporate defaults – and a vicious cycle between corporates, banks, and sovereigns,” she warned.
“We see global growth that is disappointing and uneven,” she said in a speech ahead of IMF and World Bank meetings in Lima next week.
“In addition, medium-term growth prospects have become weaker. The ‘new mediocre’ of which I warned exactly a year ago – the risk of low growth for a long time – looms closer.”
Among emerging economies, Ms Lagarde identified India as a bright spot.
But she added: “China is slowing down as it rebalances away from export-led growth. Countries such as Russia and Brazil are facing serious economic difficulties. Growth in Latin American countries, in general, continues to slow sharply. We are also seeing weaker activity in low-income countries – which will be increasingly affected by the worsening external environment.”
As it invests less, China will reduce its appetite for commodities, she argued.
“This will contribute to what could be a prolonged period of low commodity prices – a change that will need to be managed by policymakers, particularly in the large commodity exporters.”