Global growth will disappoint next year and the outlook for the medium-term has deteriorated, according to the head of the International Monetary Fund, Christine Lagarde. David Pollard reports.
A merry Christmas, but perhaps not quite such a happy New Year. At least, that's how Christine Lagarde sees 2016. The IMF chief warns global growth will be "disappointing and uneven". Mid-term prospects, she adds in an article for the Handelsblatt newspaper, also weaker. One problem: a slump in commodity prices. Admiral Markets Darren Sinden says low oil prices not such good news after all. (SOUNDBITE) (English): ADMIRAL MARKETS, MARKET ANALYST, DARREN SINDEN, SAYING "Because we were already struggling with trying to get inflation going in most developed economies, the drag that weak oil prices have meant on inflation has pushed many economies to the brink of deflation, and so while consumers are definitely better off in the short term, if deflation gets a grip that's not good news in the medium to longer term." For the positives in her message, Lagarde pointed to the first Fed rate hike in 9 years as a normalisation of US monetary policy. China's shift towards consumption-led growth another "necessary and healthy" change. But both also adding to uncertainty and vulnerability worldwide. Financial risks in emerging markets rising, she says, as the cost of borrowing in dollars goes up. Judith Tyson of the Overseas Development Agency. (SOUNDBITE) (English) JUDITH TYSON, AUTHOR, OVERSEAS DEVELOPMENT INSTITUTE, SAYING: "Many countries are borrowing simply too much relative to the size of their economies, but secondly, governments are also borrowing in US dollars. In the last year, many African currencies have depreciated very sharply against the dollar and that means the value of that debt in local currencies has grown. We've calculated that it has grown by over 10 billion dollars in the last year." The final word from Lagarde: outside of the US and, possibly, the UK - loose monetary policy remains the order of the day.