The International Monetary Fund (IMF), while slashing global economic growth forecast in 2015 urged the need for all governments and central banks to pursue accommodative monetary policies and structural reforms for supporting growth. In its latest World Economic Outlook report, IMF, lowering its growth forecast by 0.3 percentage points for both the years, pegged global growth at ‘3.5%’ for 2015 and ‘3.7%’ for 2016.
The international organization pointed that new factors supporting growth such as lower oil prices and also depreciation of euro and yen were being more than offset by persistent negative forces, including the lingering legacies of the crisis and lower potential growth in many countries.
It advised advanced economies to maintain accommodative monetary policies to avoid increases in real interest rates as cheaper oil increases the risk of deflation. It further added that if rates couldn’t be further reduced, the countries should pursue an accommodative policy 'through other means'.
However, for India, IMF kept its growth forecast unchanged at 5.8% for 2014 and further underscored that slower growth in china would impact growth in much of emerging Asia except India where weaker external demand was offset by the boost to the terms of trade from lower oil prices and a pickup in industrial and investment activity after policy reforms. It further, highlighted that the US was the only major economy for which growth projections have been raised as growth rebounded ahead of expectations after the contraction in the first quarter of 2014.
IMF projected growth in US to exceed 3% in 2015-16, with domestic demand supported by lower oil prices, more moderate fiscal adjustment, and continued support from an accommodative monetary policy stance, despite the projected gradual rise in interest rates. Meanwhile, for In emerging market and developing economies, IMF expects the growth to remain broadly stable at 4.3% in 2015 and to increase to 4.7 per cent in 2016 -a weaker pace than forecast in the October 2014 WEO.
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