Christine Lagarde, Managing Director of the International Monetary Fund IMFPhoto/Flickr

The Year Ahead 2016

The Transitions of 2016

Global growth in 2016 will be disappointing and uneven, and medium-term prospects have weakened as well, because low productivity, aging populations, and the legacies of the global financial crisis are holding back potential growth. And looming over this outlook is the need to manage spillovers from two major economic transitions.

WASHINGTON, DC – November’s terrorist attack in Paris and the influx of refugees into Europe are but the latest symptom of sharp political and economic tensions in North Africa and the Middle East. And these events are by no means isolated. Conflicts are raging elsewhere, too, and there are close to 60 million displaced people worldwide.

Moreover, 2015 was expected to be one of the hottest years on record, with an extremely strong El Niño that has spawned weather-related calamities across the Pacific. And the arrival of interest-rate normalization in the United States, together with China’s slowdown, is contributing to uncertainty and higher economic volatility worldwide. Indeed, there has been a sharp deceleration in the growth of global trade, with the drop in commodity prices posing problems for resource-based economies.

One reason that the global economy is so sluggish is that, seven years after the collapse of Lehman Brothers, financial stability is not yet assured. Financial-sector weaknesses linger in many countries – and financial risks are growing in emerging markets.

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