IMF downgrades outlook for global economy over China fears

The International Monetary Fund has once again downgraded its outlook for global economic growth as the crude oil price continues to plunge and concerns about the strength of China’s economy deepen.

In its latest update released on Tuesday, the IMF’s forecasts were lowered by 0.2 percentage points for both 2016 and 2017 as economies around the world face “strong headwinds” from China’s economic rebalancing.

The IMF now expects the pickup to be more gradual than forecast in October and is projecting growth of 3.4 per cent in 2016 and 3.6 per cent in 2017.

“The slowdown and rebalancing of the Chinese economy, lower commodity prices and strains in some emerging market economies will continue to weigh on growth prospects,” the IMF warned.

Topping the IMF’s list of risks to its forecasts is China, if “a sharper than expected showdown” derails its economic transition.

China was singled out as a potential flashpoint with growth expected to slow to 6.3 per cent in 2016 and 6 per cent in 2017, reflecting the intention of Chinese authorities to executive a managed economic slowdown.

Falling global oil prices were also cited as contributing to the jitters after declining markedly since 2015 to below $US 29 a barrel.