IMF lowers 2015 growth forecast
July 9, 2015
As Greece races to secure a deal with its creditors, the International Monetary Fund (IMF) said on Thursday that repercussions from Athens' debt saga would have only a moderate effect on global economic expansion.
But the Washington, D.C.-based economists still lowered their forecasts for the world economy from 3.5 percent growth to 3.3 percent, citing a slowdown in the world's largest economy, the US, which spilled over into Canada and Mexico.
The American economy shrank 0.2 percent during the period from January to March due to unfavorable winter weather. This drove the IMF to cut its outlook for the US to 2.5 percent growth in 2015 from April's estimate of 3.1 percent.
But the IMF's chief economist, Olivier Blanchard, did warn of the risk of "financial stress" caused by Greece's failure to yet strike a bailout deal.
All eyes were again on the Greek government on Thursday as a midnight deadline neared upon which Athens must submit proposals to secure more aid money in return for tough reforms.
A sliver of the global economy
Markets perked up during the day after European Council President Donald Tusk suggested Greece's debt burden should be discussed at Sunday's summit of 28 EU leaders, echoing similar sentiments expressed by IMF chief Christine Lagarde on Wednesday.
However, German Chancellor Angela Merkel has come out squarely in opposition of a so-called debt haircut, and her word as the leader of Europe's largest economy, is seen as holding significant weight.
"A classic haircut is out of the question for me," Merkel told reporters during a trip to Sarajevo, Bosnia.
In an update to its World Economic Outlook report, the IMF noted that growth prospects around the globe remained solid despite the drama over Greece and recent turbulence in Chinese stock markets.
"Developments in Greece have, so far, not resulted in any significant contagion," Blanchard said. "Timely policy action should help to manage such risks if they were to materialize."
The institution's chief economist pointed out that Greece makes up just 2 percent of the eurozone's economy and less than 0.5 percent of the global economy.
cjc/pad (AP, AFP, Reuters)