The International Monetary Fund has downgraded its forecast for global economic growth, with Brazil seeing the largest downgrade.
In its world economic outlook, published today, the IMF expects economic activity to increase 3.4 per cent this year followed by 3.6 per cent in 2017.
That means growth of 20 basis points lower each year than the IMF’s previous forecast in October.
Brazil saw the largest downgrade in growth, with economic contraction now estimated to be 3.5 per cent this year with no growth at all in 2017. Previous estimates were of a 2 per cent contraction this year and more than 2 per cent growth the year after.
Political uncertainty in Brazil arising from the investigation into corruption at the oil company Petrobras is “proving to be deeper and more protracted than previously expected”, says the IMF, which has a knock-on effect on growth forecasts.
The IMF said: “The slowdown and rebalancing of the Chinese economy, lower commodity prices and strains in some large emerging market economies will continue to weigh on growth prospects in 2016–17.”
The IMF warns if these key challenges are not successfully managed “global growth could be derailed”.
Russia is also likely to remain in recession in 2016 and contract 1 per cent mainly because of the decline in prices of its oil exports, the IMF predicts.