IMF Cuts Global Growth Outlook 2015; BI Sees Flat Growth in Q2-2015
The International Monetary Fund (IMF) cut its forecast for global economic growth in 2015 to 3.3 percent (y/y), from 3.5 percent (y/y) previously, as the harsh winter impacted on the US economy and drags down global growth accordingly. In the first quarter of 2015, the US economy contracted 0.2 percent (y/y). Moreover, turmoil in Greece and China cause great volatility on international financial markets, the Washington-based institution said in an update to its World Economic Outlook (WEO) on Thursday (09/07).
The IMF cut its outlook for US economic growth to 2.5 percent (y/y) in 2015, down from the 3.1 percentage point estimation it made earlier. In fact, the IMF advises the central bank of the world’s largest economy (Federal Reserve) to postpone raising interest rates (until the first quarter of 2016) as an interest rate hike would increase global volatility and impact negatively on growth. In 2014 the US economy grew 2.4 percent. The IMF expects global growth to improve to 3.8 percent next year.
Regarding emerging economies, the IMF stated that the “continued growth slowdown reflects several factors i.e. lower commodity prices and tighter external financial conditions, structural bottlenecks, rebalancing in China, and economic distress related to geopolitical factors.” However, a rebound in economic activity in several distressed economies is expected to result in a pickup in growth next year.
Meanwhile, Bank Indonesia (BI) Governor Agus Martowardojo told reporters on Wednesday (08/07) that Indonesia’s economy is expected to expand 4.7 percent (y/y) in the second quarter of 2015, flat from the previous quarter (4.71 percent y/y). The domestic economy is still plagued by the same factors that have been causing the economic slowdown in previous years: sluggish global growth, weak commodity prices (implying weak export performance), the high interest rate environment, and slow government spending. However, Martowardojo is optimistic that Indonesia’s economic growth can accelerate in the second half of 2015 provided that government spending, investment and domestic consumption improve.
Earlier this week, both the World Bank and Asian Development Bank (ADB) cut their forecasts for economic growth of Indonesia in 2015. The World Bank cut its forecast from 5.2 percent (y/y) to 4.7 percent (y/y), while the ADB cut its forecast from 5.2 percent (y/y) to 5 percent (y/y).