Protectionism, slowing trade and a decline in the growth of international value chains have all contributed to lower global growth projections, the IMF has said.
In its latest World Economic Outlook (WEO), the IMF has revised down its projections for global GDP growth this year by 0.1% to 3.1%. It predicts growth will increase to 3.4% in 2017.
“The waning pace of trade liberalisation and the recent uptick in protectionism are holding back trade growth… [and] the decline in the growth of global value chains has also played an important part in the observed slowdown,” the IMF said.
It said the growth in value chains, or international supply chains, may have slowed because the benefits they produced had "matured" or because of a slowing in the fall of international trade costs.
The report said global leaders needed to “address the backlash against global trade” and “refocus the discussion on the long-term benefits of economic integration”.
Alongside global trade, the IMF said its main concerns were the long-term uncertainty caused by the UK’s decision to leave the EU, weaker than expected growth in the US and the ongoing realignment of the Chinese economy.
Although growth predictions in advanced economies were downgraded from 1.8% to 1.6% in 2016, the WEO predicted growth in developing economies was expected to strengthen slightly from 4.1% to 4.2%.
However, prospects differed greatly across regions. While emerging Asian economies, and in particular India, showed strong growth, sub-Saharan Africa was experiencing an economic slowdown, the report said.
Larger economies in Africa, including Nigeria, South Africa and Angola, experienced “sharp slowdowns or recessions” as lower commodity prices exacerbated difficult political and domestic issues, the report said.
Brazil and Russia were also suffering from the slump in commodity prices.
The report said China’s slowdown was having spillover effects on resource exporting countries, as the country moves from an investment and industry led economy to a consumer based one, the report said.
While the transition would benefit the global economy in the long run, it could become “bumpier than expected” and hinder the upturn predicted next year.
2016 GDP growth projections by region:
- USA 1.6%
- EU 1.9%
- Eastern Europe and Turkey 3.3%
- Russia -0.8%
- Asia 6.5%
- Latin America and the Caribbean -0.6%
- MENA 3.4%
- Africa 1.4%
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