Washington, D.C., April 23, 2015 - This year has not started as well as hoped. Activity data have disappointed in 2015Q1 and business confidence has deteriorated, leading the Institute of International Finance to revise down its global growth forecast to 2.8 percent for the year, unchanged from 2014.
"The headline message of our updated outlook is again one of disappointed hopes. Global growth looks to have fallen to 2 percent in the first quarter, the lowest rate since 2014Q1," said Charles Collyns, chief economist at the IIF. "We do still expect a growth to strengthen into 2016, but we are concerned that the global economy could remain under strain. Our biggest concerns are that supply-side problems could prompt an abrupt upward shift in the expected trajectory of Fed lift-off and the possibility of a steep growth slowdown in China."'
The IIF noted that the Euro Area has emerged as a bright spot, while activity in the U.S. has sagged, held back by temporary factors. Activity in China has slowed sharply as the economy adjusts to past excesses and growth elsewhere in EM Asia has been lackluster, despite the boost from lower oil prices. ' A number of oil exporters have struggled to cope with weaker fiscal and trade revenues.
Looking forward, the IIF expects some increase in momentum during the course of the year and into 2016, when annual growth should rise to 3.3 percent. The U.S. should pick up as temporary adverse factors unwind, but even so Fed liftoff seems unlikely before September. EMs should also pick up pace, benefiting from more solid growth in mature economies, some easing in monetary policy, and stabilization in some problem cases.
The Institute of International Finance is the global association of the financial industry, with close to 500 members from 70 countries. Its mission is to support the financial industry in the prudent management of risks; to develop sound industry practices; and to advocate for regulatory, financial and economic policies that are in the broad interests of its members and foster global financial stability and sustainable economic growth. Within its membership the IIF counts commercial and investment banks, asset managers, insurance companies, sovereign wealth funds, hedge funds, central banks and development banks. For more information visit www.iif.com.