World Is On Brink Of New Recession, IMF Warns

The world is back on the brink of recession, the International Monetary Fund has warned in its latest assessment of the global economy.

The IMF cut its forecast for world economic growth this year from 3.3% to 3.1%.

That would be the lowest annual growth rate since 2009, and is only fractionally higher than the 3% level under which economists consider the world to be in recession.

The forecast change, contained in the Fund's World Economic Outlook, will be seen as further evidence of the risk that the world could slide back into a slump in the coming months.

The fall was mainly triggered by weaker growth in emerging economies, including China, which suffered a sharp fall in its stock market in the summer. The Fund predicted that China would grow by 6.8% this year and 6.3% - below Beijing’s 7% targeted growth rate.

The IMF has historically defined a global recession as being when gross domestic product failed to grow by more than 3% - though successive chief economists have chosen different definitions as they have come and gone.

The IMF’s new chief economist, Maurice Obstfeld, who recently took over from Olivier Blanchard, stopped short of calling the slowdown a recession, but said: "Six years after the world economy emerged from its broadest and deepest post-war recession, a return to robust and synchronised global expansion remains elusive...

"Despite considerable differences in country-specific outlooks, the new forecasts mark down expected near-term growth rates marginally, but nearly across the board.

"Moreover, downside risks to the world economy appear more pronounced than they did just a few months ago."

The Fund said that the Brazilian economy would shrink at a rate of 3% this year and 1% next, and that Russia would shrink by 3.8% this year.

However, advanced economies, including the UK, are predicted to fare far better.

The Fund increased its growth forecast for the UK and the US this year by 0.1 percentage points each to 2.5% and 2.6% respectively.

It said: “Recovery is most advanced in the United States and the United Kingdom, where monetary policy looks likely to tighten soon, but is more tentative in the euro area and Japan”

It predicted that oil prices would remain low, still stuck at $55 a barrel by 2017.