IMF revises down global growth forecast

By Ovunc Kutlu

NEW YORK (AA) - Global economic growth has been revised down and is now expected to be 3.1 percent in 2016, the International Monetary Fund (IMF) said Tuesday in its World Economic Outlook.

Previous forecast for growth was 3.2 percent in 2016, and 3.5 percent for 2017, according to the outlook in April.

The fund pointed to the U.K.’s vote to leave the EU, known as Brexit, and weaker than expected growth in the U.S. for the subdued economic outlook in advanced countries.

“These developments have put further downward pressure on global interest rates, as monetary policy is now expected to remain accommodative for longer,” the report said.

Lower interest rates in advanced economies, however, are expected to have a positive effect. “Financial market sentiment toward emerging market economies has improved with expectations of lower interest rates in advanced economies,” the IMF said.

Emerging markets in Asia, particularly India, have shown robust growth while new policies that support growth in China reduced fears about the country’s near-term prospects.

For 2016, the fund expects growth in advanced economies to average 1.6 percent and 4.2 percent in emerging markets and developing economies.

Global growth is expected to reach 3.4 percent in 2017, as the outlook improves for emerging markets and developing economies and the U.S. regains momentum.

“In Turkey, growth in 2016 and 2017 will be held back by the heightened uncertainty in the aftermath of recent terrorist attacks and the failed coup attempt, though macroeconomic policy easing will support economic activity,” the report said.

The inflation rate in Turkey is expected to decline gradually as the effects of previous exchange rate depreciations fade, the IMF’s report added.

The Turkish economy is predicted to grow by 3.3 percent this year, 3 percent next year and to reach a rate of 3.5 percent in 2021.

The bank also noted that countries hosting refugees, such as Turkey, faced difficult decisions over labor markets and social programs. With around 3 million refugees, the IMF estimated that Turkey’s spending on refugees amounted to around 1.3 percent of GDP.