By Paul Nettleton | 10 July 2013

The International Monetary Fund has trimmed its growth forecast for the global economy this year by 0.2% to a sluggish 3.1%, blaming weaker domestic demand and slower growth in several key emerging market countries.

The updated World Economic Outlook predicts growth of 3.8% in 2014, also down by 0.2% compared with figures in the spring.

Olivier Blanchard, the IMF’s chief economist, said that while there appeared to be explanations for the forecasts particular to each of the BRICS countries – China, Russia, Brazil, India and South Africa – he wondered if there was something behind the downward projections, a slowdown in underlying growth.

‘It’s clear that these countries are not going to grow at the same rate as before the crisis,’ he said yesterday.

Infrastructure bottlenecks, slower external demand growth and lower commodity prices are among factors cited behind the faltering performance of the BRICS countries. Growth in China, for example, is expected to be 7.8%, down by 0.3%, this year, and 7.7%, down by 0.6%, in 2014.

Growth in sub-Saharan Africa would be weaker due to domestic problems in Nigeria and South Africa. In the Middle East and North Africa, difficult political and economic transitions meant growth would remain weak.

The IMF said the eurozone would remain in recession this year, with growth contracting by 0.6% this year and rising to 0.9% in 2014, respectively 0.2% and 0.1% less than predicted in April’s WEO.

Asked if there were any signs of hope for Europe, Blanchard said: ‘There are signs of hope but it’s not on the rails yet.’

In the core countries, structural reforms were helping but at the periphery of Europe internal demand was very weak. ‘The turnaround is not now and we don’t know when it will be,’ he said.

Growth in the US is projected to rise from 1.7% this year to 2.7% in 2014, down 0.2% in both years, but based on rising household wealth and supportive financial conditions.

Blanchard said US interest rates would only rise if growth was strong enough and that would be good news.

In a forecast revised upwards by 0.3% for this year and welcomed by the Treasury, the IMF predicted 0.9% growth for the UK. Its 1.5% prediction for 2014 was unchanged.