The International Monetary Fund (IMF) will reduce its estimate for global growth this year on weakness in investment, jobs and manufacturing in Europe, the United States, Brazil, India and China, Managing Director Christine Lagarde said.
“The global growth outlook will be somewhat less than we anticipated just three months ago,” Lagarde said in a speech in Tokyo yesterday. “And even that lower projection will depend on the right policy actions being taken.” The new outlook will be announced in 10 days, after an April estimate of 3,5%, she said.
Interest-rate cuts in China and Europe yesterday and the Bank of England’s boost to an asset-purchase program underscored the fragility of the global recovery as austerity measures and debt burdens weigh on advanced nations. Lagarde is pressing for fiscal union in Europe to aid growth and financial stability as nations such as Greece wrestle with balancing their books.
The “key emerging markets” of Brazil, China and India are showing signs of slowdown, Lagarde said. Those three countries along with Russia will comprise more than 20% of the world economy this year, according to IMF data.
“Over the past few months, the outlook has regrettably become more worrisome,” Lagarde said. “Many indicators of economic activity — investment, employment, manufacturing — have deteriorated. And not just in Europe or the United States.”
The IMF has already lowered its US growth estimate to 2% from April’s 2,1%.
European Union leaders agreed at a June 28-29 meeting to loosen bailout rules, lay the foundations for a banking union and break the link between sovereign and banking debt through the direct recapitalisation of lenders.