IMF Outlines The Top Three Risks to Global Growth

Olivier Blanchard, the organization’s director of research, told CNBC that as well as the “overwhelming risk” of a poor economic recovery in Europe, there were three new issues that could threaten the global economy.

The first one is China. China has a very delicate rebalancing to do between investment and consumption, and the risk is that investment declines before consumption can really recover,” Blanchard said on Tuesday, following the release of the report.

“This would lead to lower growth in China, even below the downward revision we have already done.” The IMF revised its growth outlook for China down to 7.8 percent in 2013, and 7.7 percent in 2014.

The second key threat was Japan’s radical measures to boost its economy, or “Abenomics”, Blanchard said.

“Abenomics is a very ambitious program — but it’s a very risky one. And it seems to us that at least two of the arrows haven’t quite been totally refined yet,” Blanchard said. He added that fiscal stimulus without fiscal consolidation was “worrisome.”

Blanchard identified the scaling back of the Federal Reserve’s asset-purchasing program as the third risk facing the global economy.

The third risk… is the risk from the exit from quantitative easing in the U.S,” he said. “This can lead to a lot of volatility…. We think the volatility will calm down, but one cannot be sure.”

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza