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IMF Slashes Global Forecast Due to China Economy Slowdown

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(Credit: Chris Ratcliffe/ Getty Images) Maurice Obstfeld, chief economist at the International Monetary Fund (IMF), speaks during a news conference at the Bank of England (BOE) in the City of London, U.K., on Tuesday, Jan. 19, 2016. The IMF cut its world growth outlook, as the commodities slump and political gridlock push Brazil deeper into recession, plunging oil prices hobble Mideast crude producers, and the rising dollar curbs U.S. prospects. International Monetary Fund (IMF) News Conference On The Release of the World Economic Outlook Update
January 26
2:40 AM 2016

The International Monetary Fund slashed its global growth forecast for the third time. The previous estimation is 3.6 percent, now is becoming 3.4 percent. The economic slowdown in China and regional geopolitical tension are the reasons for cutting world growth.

For the first time in last 25 years, China's economic growth is in worst level. For years, China enjoyed the highest growth and made the country become  the second largest economy in the world and a crucial driver of the global economy. But now China has many economic problems to be resolved. Its export and import weakened, most of the factories are overcapacity, the investment is slowing, and the debt is in high level. The Government's policy will determine actual growth in 2016.

According to Mail Online, China's economy growth was 6.9 percent in 2015. It is the poor rate of the growth since 1990.

IMF economic counsellor, Maurice Obstfeld said that IMF does not see a big change in China fundamental economy since last six months.

"There is  a lot of uncertainty out there. This coming year is going to be a great challenge and policy makers should be thinking about short-term resilience and the ways they can bolster it, but also about the longer-term growth prospects," said Maurice as quoted on This is Money.

China's slowdown will remain a risk to global growth and hit other emerging markets. IMF cuts its forecast by 0.2 percentage points for emerging market and developing economies for this year becoming  4.3 percent.

According to Sky News, China will grow 6.3 percent this year, fell further than last year.

IMF predict that 2016 as a 'bumpier ride' year. Besides the China slowdown, commodity price such as oil and metals are dwindling.

"At the start of 2016 turbulence in the financial market has returned amid renewed concern about the risk to global economic growth. The fundamental forces underlying our October World Economic outlook projection have not dissipated and in some respect have intensified. It leading us to trim our expectation for future medium term growth of the world economy," Maurice Obstfeld added.

As the biggest economy in the world, US is also cut by 0.2 percentage point this year by IMF. But in Euro area, IMF added 0.1 percentage point to become 1.7 percent. Oil price lifting consumer spending support the forecast.

The world's economy is not encouraging for the year. Many factors have influenced it, especially the condition of China's economy and the lower oil price.

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