The International Monetary Fund has lowered its 2014 global economic growth forecast, warning of “negative surprises” from the United States and China and geopolitical risks in Ukraine and the Middle East.
The IMF projected global growth of 3.4 per cent for this year, down from its April estimate of 3.7 per cent.
In 2013, the world economy grew 3.2 per cent.
The downgraded 2014 growth outlook reflects “both the legacy of the weak first quarter, particularly in the United States, and a less optimistic outlook for several emerging markets,” the IMF said, in an update of its semiannual World Economic Outlook.
The US economy, which accounts for nearly a quarter of the world’s gross domestic product, shrunk by 2.9 per cent in the first quarter, in part because of severe winter weather.
On Wednesday, the IMF lowered its 2014 US growth forecast to a “disappointing” 1.7 per cent, from 2.0 per cent in mid-June and 2.8 per cent in April.
“It’s really a story of something which has just happened and that is behind us,” said Olivier Blanchard, the IMF’s chief economist.
The IMF is projecting growth will pick up in the US the rest of the year, but not enough to offset the first-quarter drag.
China, the world’s second-largest economy, will expand less than previously thought, the IMF said, lowering its forecast to 7.4 per cent from 7.6 per cent.
“In China, domestic demand moderated more than expected,” it said.
In the eurozone, still struggling to recover from recession, the growth estimate was unchanged at 1.1 per cent, and the IMF reiterated concern about weak inflation in the 18-nation European bloc.
In major advanced economies, there is a risk of stagnation in the medium term,” the IMF warned.
The brief update showed the IMF increasingly concerned by escalating geopolitical tensions.
“Geopolitical risks have risen relative to April: risks of an oil price spike are higher due to recent developments in the Middle East while those related to Ukraine are still present,” the report said.
Despite the worse-than-expected global growth outlook for 2014, the IMF left its 2015 forecast unchanged at an annual rate of 4.0 per cent, the fastest pace since 2011.