IMF slightly more optimistic about Caribbean...

CHINA’S SLOWDOWN andtumbling commodity prices willpush global economic growththis year to the lowest levelsince the recession year 2009,the International Monetary Fund(IMF) predicted Tuesday.

In a report Tuesday inadvance of the IMF-World Bankannual meetings here this week,the fund says the world econo-my will grow 3.1 per cent thisyear, down from a July forecastof 3.3 per cent and from 3.4 percent growth last year.

“The risks seem more tilted tothe downside than they did justa few months ago,” IMF chief

economist Maurice Obstfeldtold reporters.

Still, Obstfeld downplayedthe risk of a global recession.

ECONOMIC WEAKNESS

The Federal Reserve lastmonth cited economic weaknessaround the world – and especiallyin China – when it decided topostpone a long-anticipatedincrease in short-term US interestrates, which it has kept nearzero since December 2008.Obstfeld said any rate increasein the United States would begood news, reflecting the Fed’svote of confidence in the

American economy, the world’slargest.

The fund predicts the UnitedStates will grow 2.6 per centthis year, up from a July fore-

cast of 2.5 per cent and from 2.4per cent growth last year.

Emerging market economieswill likely grow four per cent,which would mark the fifth

straight annual drop. They havebeen hurt by an economic slow-down in China, which hasreduced demand for emergingmarket raw materials and

pushed down prices of com-modities such as copper and oil.

Among those hardest hit bythe commodities bust: TheBrazilian economy, forecast tocontract by three per cent thisyear; and Russia, forecast toshrink 3.8 per cent because oflower oil prices and economicsanctions imposed by the Westas punishment for Russianaggression in Ukraine.

Collapsing energy prices arealso hurting Canada. The IMFdowngraded its forecast for theCanadian economy by half apercentage point to 1.5 per centthis year.

The Chinese economy hasbeen slowing for four straightyears, partly because the gov-ernment is engineering a transi-tion away from dependence onexports and often-inefficientinvestments. Instead, they aremoving towards slower, moresustainable growth based onconsumer spending. The IMFexpects Chinese economicgrowth to drop to a 25-year low6.8 per cent this year, but that isunchanged from its July fore-cast.

Chinese manufacturers arestruggling, but “services seemto be booming,” Obstfeld said.

The IMF foresees continuedimprovement in Europe. It keptits forecast for 1.5 per centgrowth this year in the 19countries that share the eurocurrency.

The Japanese economy isexpected to grow 0.6 per centthis year, down from the IMF’sJuly forecast of 0.8 per cent butan improvement from last yearwhen it shrank 0.1 per cent.

– AP

Camilo ThameSenior Business Writer

AMID A bleaker outlook foreconomic growth globally, theInternational Monetary Fund

(IMF) raised its forecast for Caribbeangrowth slightly higher than expecta-tions it held six months ago.

That optimism was held for mostcountries – nine of 15 – in the region,but not for Jamaica. The growth projec-tion for the country was lowered by 0.6percentage points to 1.1 per cent in2015. It was also lowered by 0.1 per-centage point to 2.1 per cent expectedgrowth next year.

Moreover, the uptick hardly repre-sents an economic resurgence for theregion. The multilateral lending agencyincreased its forecast for growth by 0.1percentage point to 3.8 per cent, whilelowering its projection for 2016 growth

by the same amount to 3.4 per cent.In contrast, all the other regions in

the Western Hemisphere are expectedto see an increase in output next year,even though South America will still bein recession. The IMF projects 0.3 percent contraction in GDP for the conti-nent in 2016 following a 1.5 per centdecline in real output this year.

“The downturn in Brazil was deeperthan expected,” said the IMF’s latestWorld Economic Output (WED)report published yesterday. “Withdeclining commodity prices, momen-tum continues to weaken in other coun-tries in the region.”

The deteriorating political environ-ment in Brazil has dragged down busi-ness and consumer confidence.Investment there is declining rapidlyand tightening macroeconomic policyis squeezing domestic demand.

Venezuela is projected to experience

a deep recession in 2015 and 2016 –contracting by 10 per cent and 6 percent, respectively – due to the declinein oil prices since mid-2014. Inflationin the South American country is pro-jected to be well above 100 per centthis year.

Lower oil prices have also hit outputin Ecuador and Colombia, while weak-ness in metal prices is projected todampen growth recovery in Peru andChile.

The outlook for growth amongCaribbean commodity exporters wasalso downgraded by the IMF.

Trinidad & Tobago, for which, sixmonths ago, the multilateral projected1.2 per cent and 1.5 per cent growth for2015 and 2016, respectively, is nowprojected to realise growth of one percent and 1.4 per cent in the respectiveyears.

Expectation for Guyana, which

exports gold, was also lowered by 0.6percentage points to 3.2 per centgrowth in 2015. On the other hand,projection for 2016 growth for thecountry was increased by 0.5 percent-age points to 4.9 per cent.

Dominica Republic is where most ofthe IMF’s optimism for the Caribbeanlies this year. Incidentally, mining andconstruction has been driving the econ-omy there. In particular, the countryreopened its largest mine after mainte-nance shutdowns in the first half of2015.

EASTERN CARIBBEAN

Countries in the Eastern Caribbeanall saw upward revisions or nochange to the IMF’s growth projec-tion for 2015. This was largely due tostrong tourism numbers. Barbados,Grenada and St Lucia recorded a fiveto 15 per cent rise in tourist arrivals

in the first half of the year. St Vincentand the Grenadines reported a slightdecline in stopovers, but the multilat-eral did not feel it had to change itsgrowth forecast for the country madein April.

Jamaica’s higher tourism receiptshave also been a major prop for thelocal economy, even though the IMFdowngraded its growth projections forthe country.

Advanced recovery in the UnitedStates and the United Kingdom is theprimary reason behind the favourablegrowth numbers for most of theCaribbean.

Still, growth in the US was weakerthan expected, despite a strong secondquarter, according to the IMF.

“This reflected setbacks to activityin the first quarter, caused by one-offfactors, notably harsh winter weatherand port closures, as well as muchlower capital spending in the oil sec-tor,” said the WEO report. “Despiteweaker growth, the unemploymentrate declined to 5.1 per cent at theend of August, 0.4 percentage pointbelow its February level (and onepercentage point below the level ayear ago).”

camilo.thame@gleanerjm.com

• www.jamaica-gleaner.com • gleanerjamaica • jamaicagleaner • BUSINESSC4 THE GLEANER, WEDNESDAY, OCTOBER 7, 2015

The International Monetary Fund headquarters in Washington, DC.

IMF slightly more optimisticabout Caribbean growth

... Downgradesforecast for world,emerging marketeconomies