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IMF Sees the World Economy Heading The Wrong Way

The IMF projects the global economy is headed south.

GettyImages-520625744
GettyImages-520625744

The International Monetary Fund is growing more pessimistic about the direction of the global economy -- including the United States -- and warning that nations around the world could see job losses, a credit crunch, and weakening manufacturing in the months ahead.

The International Monetary Fund is growing more pessimistic about the direction of the global economy — including the United States — and warning that nations around the world could see job losses, a credit crunch, and weakening manufacturing in the months ahead.

In its latest growth projections released Tuesday, the IMF estimated that the global economy would expand by 3.2 percent this year. The projection is 0.2 percentage points lower than the January forecast, 0.4 percentage points lower than the October 2015 forecast, and and 0.6 percent points down from its July 2015 estimate. It sees expansion in 2017 of 3.5 percent, down from a previous prediction of 3.6 percent.

The outlook for all major advanced economies, including the the U.S., Canada, the eurozone, Britain, and Japan are all trending down. The United States is expected to grow by 2.4 percent this year, down from a 2.6 percent projection in January. The IMF blamed the downtick on a strong dollar, which makes American goods more expensive overseas.

Beyond the numbers, that kind of a slowdown could mean fewer jobs at a time when work is desperately needed in places like Europe, where the unemployment rate is more than 10 percent. It could also become a factor in the American presidential election. Republican front-runner Donald Trump and Democratic Sen. Bernie Sanders have centered their campaigns on populist arguments about an imminent economic slowdown that will cause mass suffering inside the United States. Trump, in a recent interview with the Washington Post, said the U.S. was headed for a “very massive recession.”

If proven true, the IMF predictions could also herald a rough year ahead for President Barack Obama. Entering his final months in office, Obama’s approval ratings have steadily increased after a string of positive economic news, including a U.S. unemployment rate of less than five percent and data showing that average hourly wages in January increased 0.5 percent to $25.39. An Associated Press-GfK poll released Monday shows that for the first time since 2013, more than 50 percent of Americans approve of the president. A decrease in economic growth could undermine that support.

“Global growth continues, but at an increasingly disappointing pace that leaves the world economy more exposed to negative risks,” IMF Chief Economist Maurice Obstfeld said at a press conference Tuesday during the semiannual IMF and World Bank meetings this week. “Growth has been too slow for too long.”

China, on the other hand, saw its economic lot improve. The IMF now believes China will grow by 6.5 percent this year, up from 6.3 percent in January. Still, this is far less than China’s 10 percent annual growth in recent years.

News is not good in other developing economies. Russia, hammered by western sanctions over its actions in Ukraine and low oil prices, will continue to be in recession in 2016, the bank said. The same is true in Brazil, where there’s rampant political turmoil as President Dilma Rousseff faces impeachment due to the Petrobras scandal; a Brazilian congressional committee voted to remove her from office Monday.  

Photo credit: MOLLY RILEY/Getty Images

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