Deterioration in the IMF's global outlook; trims 2016 forecast from 3.6% to 3.4%.


Wednesday, January 20, 2016 09:26 AM / FBNQuest Research

The IMF’s latest World Economic Outlook (WEO) is entitled Subdued Demand, Diminished Prospects. For this update, the Fund has again trimmed its forecast for world output growth in 2016, from 3.6% to 3.4%.

The principal losers for 2016 are the US (to 2.6% from 2.8%), Brazil (to a contraction of -3.5% from -1.0%) and Russia (to -1.0% from -0.4%). India continues to enjoy the highest forecast growth both this year and next. The projections for China are again unchanged. Today we should see Q4 2015 data out of Beijing.

Risks to the outlook are tilted to the downside in the update. The central narrative is that improvements next year in Brazil, Russia and some unspecified countries in the Middle East will compensate for the slowdown and rebalancing underway in China. Even this modest recovery is vulnerable to new shocks, either political or economic.   

The WEO has trimmed its growth forecast for Nigeria for this year from 4.3% to 4.1%. For 2017, it has penciled in 4.2%.

The commodity forecasts do not make great reading for Nigerian policymakers. Average nonfuel commodity prices are projected to fall again this year, by -9.5% y/y, before staging a modest 0.4% recovery in 2017.

The Fund has cut its price assumptions, based on the futures markets, for its basket of three crude blends (including UK Brent), to averages of US$42.0/b this year and US$48.2/b in 2017. Its reading of futures markets was made on 10 December.

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