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BusinessWorld economy entering 'perilous phase'- IMF

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World economy entering ‘perilous phase’- IMF

The world economy is entering a “perilous phase” of low economic growth and high financial risk, the International Monetary Fund has warned in its latest set of assessments.

The IMF, which is holding its spring meetings in Washington this week, downgraded its outlook for global growth and said its medium-term forecast for the economic output was now at the weakest level since the fund began publishing these forecasts in 1990.

However, its chief economist Pierre-Olivier Gourinchas added that there were also more severe risks in prospect.

He said: “We are… entering a perilous phase during which economic growth remains low by historical standards and financial risks have risen, yet inflation has not yet decisively turned the corner.”

“Below the surface,” he added, “turbulence is building, and the situation is quite fragile, as the recent bout of banking instability reminded us.

“Inflation is much stickier than anticipated even a few months ago. While global inflation has declined, that reflects mostly the sharp reversal in energy and food prices. But core inflation, excluding the volatile energy and food components, has not yet peaked in many countries.”

This cocktail of factors prompted the IMF to cut its forecast for global economic growth by 0.1 percentage points this year and next, to 2.8% and 3% respectively.

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