Global growth will be weaker than expected this year says Lagarde

Global growth is likely to be weaker than expected this year thanks to a slower recovery in advanced economies and a further slowdown in emerging economies, International Monetary Fund chief Christine Lagarde has said.

Ms Lagarde also warned emerging economies to “be vigilant for spillovers” from China’s slowdown, tighter global financial conditions, and the prospects of a US interest rate hike.

Her comments came as September opened with a fresh fall in global share prices amid continued investor fears over the slowdown in China on the back of more worrying economic data.

In Dublin, the ISEQ was down more than 3pc mid morning, falling faster that both London and Frankfurt, but recovered some ground to close the day down 2.3pc.

After a few upbeat days for world markets, concern about China revived after surveys showed its manufacturing sector shrinking at its fastest pace in three years and its services sector also cooling.

Asian stocks, particularly in Japan and Australia , fell overnight, and the gloomy mood extended to Europe.

Ms Lagarde, speaking at a conference in Indonesia, said Asia is expected to lead economic growth this year.

“Overall, we expect global growth to remain moderate and likely weaker than we anticipated last July.

“This reflects two forces: a weaker than expected recovery in advanced economies, and a further slowdown in emerging economies, especially in Latin America,” Ms Lagarde said. “Asia as a region is still expected to lead global growth. But even here, the pace is turning out slower than expected – with the risk that it may slow even further given the recent spike in global risk aversion and financial market volatility.”

The IMF in July forecast global growth at 3.3pc this year, slightly below last year’s 3.4pc.

Ms Lagarde said China’s economy was slowing, although not sharply or unexpectedly, as it adjusts to a new growth model.

“The transition to a more market-based economy and the unwinding of risks built up in recent years is complex and could well be somewhat bumpy,” she said.

“That said, the authorities have the policy tools and financial buffers to manage this transition.”

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