In its latest World Economic Outlook update, the fund’s forecast for 2015 was unchanged at 3.5% and 3.8% for next year, in line with its January projections.
Olivier Blanchard, the IMF’s economic counsellor and director of research, said there were a number of complex forces shaping the economic outlook around the world.
He said: ‘Legacies of both the financial and the euro area crises – weak banks and high levels of public, corporate, and household debt – are still weighing on spending and growth in some countries. Low growth in turn makes deleveraging a slow process.’
Blanchard also noted that the combination of an ageing population, lower investment, and sluggish improvements in productivity would lead to significantly lower potential growth both in advanced and emerging market economies.
‘More subdued growth prospects lead, in turn, to lower spending and lower growth today,’ he said.
Compared to last year, the outlook for advanced economies is improving, the fund said, with growth forecast to increase from 1.8% in 2014 to 2.4% this year.
Growth in the US is projected to exceed 3.1% in 2015 and 2016, down 0.5% and 0.2% on the January predictions. Growth will be driven by lower oil prices and the US Federal Reserve’s quantitative easing (QE) programme, the fund said.
Predictions for the eurozone were revised up and growth is expected to hit 1.5% in 2015 and increase by 0.1 percentage point next year, supported by lower oil prices, low interest rates and a weaker euro. The European Central Bank’s decision to launch a QE programme in January has somewhat stabilised the regions persistently low inflation, the fund said.
And after a disappointing 2014, a weaker yen and lower oil prices are expected to lead to a pickup of growth in Japan this year to 1.0% and 1.2% in 2016.
Meanwhile, growth in emerging markets and developing economies, compared to last year, is projected to slow from 4.6% in 2014 to 4.3% in this year.
The fund highlighted Russia, which is in serious economic trouble, and Brazil, where there is severe slowdown in growth.
Russia is expected to contract by 3.8% this year and 1.1% in 2016, because of the economic impact of sharply lower oil prices and increased geopolitical tensions.
Brazil is also expected to enter into recession this year because of squeezed public spending, a cut in investment from state-owned oil company Petrobras and drought. The IMF projects growth to contract by 1% in 2015, but grow by 1% next year.
The fund also added that geopolitical tensions, stemming from ongoing conflicts in Ukraine, the Middle East, and West Africa, could generate regional and global spillovers.
