The global economy is expected to grow at a moderate pace in 2016, amid warnings from the International Monetary Fund that growth could be derailed if changing global conditions aren't navigated successfully.
Citing ongoing problems with China's economic rebalancing, falling commodity prices and rising US interest rates, the IMF on Tuesday downgraded its 2016 and 2017 predictions for global growth, cutting each by 0.2 percentage points.
"This coming year is going to be a year of great challenges and policymakers should be thinking about short-term resilience and the ways they can bolster it, but also about the longer-term growth prospects," IMF economic counsellor and director of research Maurice Obstfeld warned on Tuesday.
The report said the global risk outlook remained "tilted to the downside" amid a generalised slowdown in emerging market economies, China’s rebalancing, lower commodity prices, and the gradual exit from "extraordinarily accommodative" monetary conditions in the United States.
Strains in some large emerging market economies are also expected to weigh on growth prospects in 2016–17.
"If these key challenges are not successfully managed, global growth could be derailed," the report said.
As good a day as any to repeat this, as the IMF cuts world growth forecast for 16th time out of 21 global outlooksJanuary 19, 2016
CommSec Chief Economist Craig James told The Huffington Post Australia global growth is expected to pick up pace, despite the downward revision.
"The expectation is growth will actually be picking up in 2016 -- 3.1 percent last year, 3.4 percent expected this year -- so while they trimmed the forecast the expectation is growth will actually be faster than last year," he said.
"If these forecasts end up coming to fruition, that's a good news outcome."
IMF Obstfeld: Global risks two-sided & carry a silver lining making negative effects on total world growth less dire https://t.co/mi03G0Xj1c— IMF (@IMFNews) January 19, 2016
He said if China continues to grow and exceeds the IMF's prediction of 6.3 percent for the country, it will be good news for major trading partner and commodity exporter Australia.
UBS Global Markets economist Paul Donovan told Bloomberg the report was "largely nonsensical"
"If you ever talk about IMF Forecasts you can automatically assume they are are about six to 12 months behind the times, always," he said.
"For crying out loud it's 3.6 to 3.4 -- 0.2 is the shift. This is a rounding error.
"This is the IMF going for headlines, it's largely nonsensical."
Slower growth in China could affect trading partenrs, the IMF says.
Treasurer Scott Morrison told Fairfax Media the revisions to global growth forecasts by the IMF were not unanticipated.
"The forecasts announced by the IMF for global growth today are consistent with those contained in that update" he is reported to have said.
"More importantly, the IMF statement rightly points to the need for important structural reforms to drive economic growth. Failure to make these important changes puts jobs at risk. This is why the government is looking at ways we can make our tax system more growth friendly, in particular by reducing personal income taxes."
The IMF report comes after China's full year economic growth hit a 25 year low, and amid reports Australian CEO's are less confident about their companies growth prospects in 2016 than they were a year ago.Suggest a correction