IMF’s Lagarde warns of emerging markets’ volatility

Lagarde said that even for advanced economies, activity is projected to pick up only modestly this year [Xinhua]

Lagarde said that even for advanced economies, activity is projected to pick up only modestly this year [Xinhua]

As global markets continue to reel from the effects of China’s slowing growth and currency devaluation, the International Monetary Fund’s Christine Lagarde warned over the weekend that “downside risks to the outlook” particularly of emerging economies have increased in 2015.

“The major challenge facing the global economy is that growth remains moderate and uneven,” she told reporters following a meeting of senior finance officials from G20 countries in Ankara, Turkey.

“For the emerging market economies, prospects have weakened in 2015 relative to last year, though some rebound is projected next year. For both the advanced and emerging economies, productivity growth continues to be low,” she warned.

Financial markets have so far signaled chaos as uncertainty over China’s growth transition continues, triggering fears that saw investors pull capital from the Asian region.

“Global growth remains moderate, reflecting a further slowdown in emerging economies and a weak recovery in advanced economies,” an IMF note prepared for the G20 meet said.

Lagarde said that the IMF would be revising downward its July forecast of 3.3. per cent global growth.

Meanwhile, the G20 finance experts agreed to take “decisive action” to reverse the current downward trends in all major indices.

They also urged China and Latin American markets – which have suffered two digit losses in their currency valuations – to “resist all forms of protectionism” and avoid a currency war.

Hoping to allay global fears, Chinese Finance Minister Lou Jiwei told the G20 in Ankara that the Chinese economy has entered a “new normal” status and the growth rate of economy is predicted to be around 7 per cent in the coming four to five years.

Zhou Xiaochuan, China’s Central Bank governor pointed out in a written statement that the renminbi is not on course for a long-term devaluation.

Lagarde has called China’s economy “in transition”.

“We are certainly talking to the Chinese authorities about their transition to a more market-determined economy, to an internationalization of their currency,” Lagarde told reporters in Indonesia last week.

The BRICS Post with inputs from Agencies

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