IMF: THE WORLD ECONOMY IS WORSE OFF THAN WE THOUGHT

IMF: The world economy is worse off than we thought

By Charles Riley @CRrileyCNN January 20, 2015: 7:33 AM ET

HONG KONG (CNNMoney)

Sorry folks, the world economy is not going to improve much this year. Or next year.

The world economy will grow by just 3.5% in 2015, and by 3.7% in 2016, according to the latest estimate from the International Monetary Fund. Both estimates are down 0.3 percentage points from the group's previous forecast, made in October.

One bright spot was the United States: The IMF revised its estimate for U.S. economic growth to 3.6% this year, up half a percentage point from the October forecast.

The IMF estimates underscore the difficult set of choices facing policymakers around the world.
chart global economy 011915

In the wake of the global financial crisis, trillions of dollars have been pumped into the world economy in the form of cheap central bank cash, boosting stocks, bonds and real estate prices.

Yet growth remains limited. Even drastically lower oil prices will have limited impact on stimulating the overall economy.

"New factors supporting growth -- lower oil prices, but also depreciation of euro and yen -- are more than offset by persistent negative forces," said IMF chief economist Olivier Blanchard.

Related: China posts its worst growth in 24 years

Russia is expected to be among the hardest hit nations, with the IMF predicting a 3% contraction this year, followed by another 1% decline in 2016. Both figures are sharply lower than the October estimate.

China, the world's second-largest economy, will continue its slowdown, with growth hitting 6.8% this year and 6.3% next year.

The IMF said growth could be stronger than forecast if lower oil prices deliver a greater boost than assumed. Growth could take a hit if volatility spikes in emerging markets.

Related: Plunging oil prices won't solve China's problems

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First Published: January 19, 2015: 10:16 PM ET