IMF chief warns of weaker growth

Global economic growth this year “will be weaker” than the 3.4 percent expansion seen in 2014, IMF Managing Director Christine Lagarde said Wednesday, pointing to uncertainty about China and a sharp slowdown in emerging markets.

“Our World Economic Outlook numbers will be released next week, but I can already tell you this: global growth will likely be weaker this year than last, with only a modest acceleration expected in 2016,” she said ahead of the upcoming International Monetary Fund/World Bank annual assembly in Peru.

Significant challenges for the world economy include “China’s transition to a new growth model and the normalization of U.S. monetary policy,” Lagarde said, referring in the second case to an expected increase in interest rates.

“To be clear: both of these shifts are necessary and healthy. They are good for China, good for the United States, and good for the world. The challenge is to manage them as efficiently and as smoothly as possible,” Lagarde said at an event sponsored by the Council of the Americas in a Washington hotel.

Emerging markets “are likely to see their fifth consecutive year of declining rates of growth,” she said.

While India remains a “bright spot,” the Chinese economy is slowing and “countries such as Russia and Brazil are facing serious economic difficulties,” the former French finance minister said.

By contrast, Lagarde said, the outlook for advanced economies is more encouraging, as “the moderate recovery is strengthening in the Euro Area, Japan is returning to positive growth, and activity remains robust in the U.S. and the U.K. as well.”

The IMF’s most recent forecast, released in July, projected growth of 3.3 percent this year and 3.8 percent in 2016.