WASHINGTON: The International Monetary Fund said yesterday that the global economy faces wide-ranging threats from weak growth and rising protectionism, warning of possible “severe” damage should Britain leave the European Union.
The IMF cut its global forecast for the third straight quarter, saying economic activity has been “too slow for too long,” and called for immediate action by the world’s economic powers to shore up growth.
It said intensifying financial and political risks around the world, from volatile financial markets to the Syria conflict to global warming, had left the economy “increasingly fragile” and vulnerable to a turn toward recession.
It said it was concerned over “fraying” unity in the European Union under pressure from the migration crisis and the “Brexit” possibility.
It also pointed to contractions in a number of large emerging market economies, most notably Brazil, where the economic downturn has been accompanied by political crisis.
Seeing a fall in global trade and investment, the IMF cut its forecast for world growth this year to 3.2 percent, 0.2 percentage points lower than its January outlook and down from the 3.8 percent pace expected last July.
That reflects a glummer view of growth in developed and emerging economies, with the forecasts for Japan, Russia and Nigeria all pared back sharply.
Most leading economies saw their growth projections cut by 0.2 percentage points. The outlook for the United States was cut to 2.4 percent this year, from 2.6 percent in January.
Only the pictures in China and developing eastern Europe were better. But at a slightly upgraded pace of 6.5 percent growth, China was still on track for a slowdown from last year.
The IMF sees the slowdown continuing in 2017, when China is forecast to grow 5.2 percent.
It singled out the swings in global financial markets.
“Since last summer, we have seen two distinct rounds of global financial turbulence,” said IMF chief economist Maurice Obstfeld.
The result, he said, is capital flight from riskier assets and economies, higher borrowing costs for developing countries, and continued weakness in commodity prices.
The second factor with global consequences, the IMF said, is the instability in Syria and elsewhere that has driven millions of refugees into surrounding states and Europe.
The burden from the flood of migrants, coupled with weak growth and high unemployment have fueled “a rising tide of inward-looking nationalism.”
That, it added, is manifest in the looming Brexit referendum which, if British voters opt to leave the EU, the IMF said “could do severe regional and global damage by disrupting established trading relationships.”
