BEIJING—Developing nations continue to be the backbone of global growth, but face a series of headwinds including a slowdown in China, weak demand in advanced economies, low commodity prices and political strife, the IMF warned Tuesday.
The International Monetary Fund said the outlook for emerging markets was lopsided, with India a bright spot but sub-Saharan Africa enduring either tepid growth or recession as they are hit by a low demand for raw materials.
Once considered a key driver of global growth, developing nations have been battered since the financial crisis, as crucial custom from sputtering Western economies has dried up, while governments struggle with huge debts.
In an update to its World Economic Outlook the IMF said emerging economies had enjoyed “a period of relative calm in recent months” after the global turmoil unleashed at the start of the year by worries over China’s economy.
It also increased its forecast for expansion this year in developing nations, to 4.2 percent from 4.1 percent estimated in July, saying they would make up more than three-quarters of projected world growth.
But it said: “The outlook for these economies is uneven and generally weaker than in the past. While external financing conditions have eased with expectations of lower interest rates in advanced economies, other factors are weighing on activity.”
It said these included the slowdown in China, “whose spillovers are magnified by its lower reliance on import- and resource-intensive investment, commodity exporters’ continued adjustment to lower revenues; spillovers from persistently weak demand in advanced economies; and domestic strife, political discord, and geopolitical tensions in several countries.”
China, considered one of the key engines of the global economy is seeking a recalibration to make consumer spending a key driver for growth, instead of the massive government investment and cheap exports that have underpinned its decades-long rise.
But the transition is proving painful as growth rates sit at 25-year lows and key indicators continue to come in below par.