The International Monetary Fund cut its forecasts for global growth once again on Tuesday, citing the “return of financial turmoil itself, impairing confidence and demand in a self-confirming negative feedback loop” as a big risk to the global economy.
The IMF cut its 2016 growth forecast from 3.4% to 3.2%, and its 2017 outlook from 3.6% to 3.5%.
“Growth has been too slow for too long,” IMF chief economist Maurice Obstfeld said, adding that “There is no longer much room for error.”
“But by clearly recognising the risks they jointly face and acting together to prepare for them, national policy makers can bolster confidence, support growth, and guard more effectively against the risk of a derailed recovery,” Obstfeld continued.
“Another threat is that persistent slow growth has scarring effects that themselves reduce potential output and with it, consumption and investment,” the fund said. “Consecutive downgrades of future economic prospects carry the risk of a world economy that reaches stalling speed and falls into widespread secular stagnation.”
The IMF has cut global forecasts frequently in recent years, and despite these cuts, forecasts have often proved too optimistic. In February, a chart from the fund showed the sad state of global growth and perennially disappointed IMF forecasts. For instance, in 2011, it predicted that gross GDP growth globally would be 5%. Now it is just 3.2%.