IMF may slash global growth forecast, says global economic recovery to accelerate 2015

The International Monetary Fund (IMF) may slash its global growth forecasts on the back of persisting weak investments.

The IMF is preparing to update its economic forecasts this month after predicting April 8 that the global economy will expand 3.6 percent this year and 3.9 percent in 2015.

Christine Lagarde, IMF’s Managing Director hinted at this at the Cercle des Economistes conference in Aix-en-Provence, France, noting that global economic activity should accelerate in 2015 after being gloomy at the start of 2014.

She said, “The global economy is gathering speed, though the pace may be a bit less than we previously predicted because the growth potential is lower and investment”

Lagarde’s statement highlights the threats to global economic growth at a time when the European Central Bank is fighting inflation and the American Federal Reserve is decreasing stimulus.

As spending remain dreary, risks remain in the United States amidst an accelerated rebound.

Growth in the U.S. is set to accelerate in coming months and the European recovery is still not as strong as it should be, Lagarde said, adding, that risks to U.S. growth include the ability of the Federal Reserve to taper in an “orderly” manner and that of the Treasury to put in place a medium-term budget framework.

Lagarde said the impact of central banks’ accomodative policies on demand had its limits and countries should also act to help growth – in particular with investment on infrastructure, education and health – as long as their debt would still be sustainable.

The IMF’s update of its global economic outlook, expected later this month, will be slightly different from the forecasts published in April, she said.

Lagarde estimated that growth in China this year would be between 7 and 7.5 percent.