IMF

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Interest rates on hold as IMF warns five years of low growth looms
THE AUSTRALIAN OCTOBER 08, 2014 11:10AM

David Uren

Economics Editor
Canberra

THE global economy faces another five years of stagnation, the International Monetary Fund warned overnight as it cut its growth forecasts for the third year in a row and urged nations to ­reinvigorate economic reforms.

Releasing the fund’s updated economic outlook, IMF chief economist Olivier Blanchard ­described global growth as ­“mediocre” and, in a reference to the agenda Australia has set for the G20 members ahead of next month’s summit in Brisbane, said the difficult outlook underlined the importance of identifying economic reforms that could lift output.

RBA statement

“Potential growth rates are being revised downward and these worsened prospects are in turn affecting confidence, demand and growth today,” he said.

The Reserve Bank is expecting Australia’s growth to remain below its long-term trend rates, announcing after its board meeting yesterday that rates would be kept at their record low of 2.5 per cent for the 14th consecutive month and would remain stable into the future. It is the second-longest period of interest rate ­stability on record, with economists predicting rates to remain on hold until at least next year.

Reserve Bank governor Glenn Stevens highlighted concerns about the Chinese economy and the value of the Australian dollar, which despite recent falls to below US87c remained high, given the sharp drop in prices for Australia’s key export commodities.

The IMF says the global economic recovery remains “fragile and uneven”. It now expects world growth will reach 3.3 per cent this year, the same as last year, and 1.4 percentage points lower than it thought likely when preparing its forecasts three years ago. Before the financial crisis, global growth rates in excess of 5 per cent were the norm.

The fund says growth should lift to 3.8 per cent next year, helped by better performance in a few nations led by the US and Britain, but there is a danger there will be no further improvement in growth for an extended period.

“Demand shortfalls in advanced economies, together with the erosion of potential output, could lead to sustained global economic weakness over a five-year period,” the IMF report says. This is not yet its central forecast, but the fund sees it as the biggest risk to the global economy over the medium term.

The IMF believes share and other financial markets are not taking full account of the risks in the world economy, with Mr Blanchard warning that “financial markets may be too complacent about the future”.

The IMF’s modelling shows that a scenario in which growth did not rise above 3.7 per cent would result in advanced economy inflation rates dropping to 1 per cent and cause sharp falls in investment, employment growth and commodity prices.

The IMF forecasts for Australia’s growth of 2.8 per cent this year and 2.9 per cent next year are consistent with Treasury estimates. Like Treasury, it expects unemployment to remain above 6 per cent at least to the end of next year.

The IMF reviews its global forecasts four times a year and has been downgrading its estimates on every occasion since October 2011.

Mr Blanchard said this forecast failure was partly because legacies of the global financial crisis, including high government debts and elevated unemployment, had proven more intractable than expected. However, he said poor productivity growth and declining labour force participation meant the potential growth rates of both advanced and emerging economies were being revised lower and this was depressing investment.

The IMF is also concerned about the outlook for China. It is expected to grow by 7.1 per cent next year, down from the 7.3 per cent expected in April, but the fund says there is a risk of a much weaker result.

“Real estate investment has been an important engine of growth in China, and it will be challenging to allow the imbalances in the market — including signs of overvaluation in large cities and oversupply in many smaller cities — to correct while preventing an excessively sharp slowdown,” its report said. “Risks of a hard landing in China in the medium term owing to excess capacity and the credit overhang remain a concern, given that investment and credit continue to be the main drivers of growth.”

Mr Stevens also pointed to the RBA’s concerns, saying China’s growth appeared to have softened in recent months and “weakening property markets there present a challenge in the near term”.

Speaking from New York, Joe Hockey said yesterday he remained confident about China’s outlook. The Treasurer told the Bloomberg news service that some commentators were “far too bearish” on China.

“I do not believe the Chinese government is going to permit China to have a significant economic deterioration from what is near 7.5 per cent growth,” he said.

Mr Stevens also indicated that the fall in the Australian dollar, which has dropped 6 per cent since the RBA’s meeting last month, remained high given the fall in export prices, with iron ore prices having dropped 20 per cent in the past three months. He said the exchange rate was “offering less assistance than would normally be expected in achieving balanced growth in the economy”.

The IMF said some increase in asset prices, such as shares, was reasonable given continued low interest rates worldwide and reduced risks of major catastrophe, such as the breakup of ­Europe.

The fund also noted Australia was among 17 nations with booming housing markets, while there were 33 nations where housing markets were yet to recover fully from the global financial crisis.

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Market plunge an 'over-reaction': Lagarde
DOW JONES NEWSWIRES OCTOBER 18, 2014 5:30AM

International Monetary Fund chief Christine Lagarde says the plunge in global stock exchanges this week was due to a market "over-reaction".

"Generally the IMF doesn't comment on short-term market variations (but) we can't help ourselves from thinking we're in the presence of a correction and maybe at this stage an over-reaction," she said on Friday.

Markets have plunged this week on fears that the euro crisis could be resurfacing, the Ebola virus and geopolitical worries.

European markets bounced back sharply on Friday, however, with Frankfurt up more than three per cent, the French market up nearly three per cent and London higher by just shy of two per cent.

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Curiouser and curiouser in global Wonderland
DAVID ROGERS, EXCHANGE THE AUSTRALIAN OCTOBER 24, 2014 12:00AM

FEELING confused about the global economic outlook? Goldman Sachs says economic and financial conditions remain “far from normal”, and the “Wonderland” of near-zero interest rates in the major economies is distorting the way economic cycles normally evolve.

To highlight the degree of uncertainty, Goldman Sachs chief global equity strategist Peter Oppenheimer outlines three possible scenarios for the post-global financial crisis world: “secular stagnation”, “sustained moderation” and “normalisation”.

The first two scenarios are basically low-growth outcomes where inflation and bond yields stay low, forcing investors to keep hunting for higher yields in equities, although sustained moderation would imply some improvement in economic growth and company profits.

“Normalisation” would need a new global growth engine, driven by business restructuring, the US shale gas energy revolution and possibly a major shift towards consumption in China. That would be good for equities and a negative for bonds.

Goldman Sachs leans towards sustained moderation as the most likely scenario, although that would not be entirely bad for equities, as they should continue to outperform bonds, albeit with much lower absolute returns than enjoyed since 2010.

“This global moderation may continue for some years,” Oppenheimer says. “It is likely to end as a result of either the bursting of the ‘bond bubble’ as interest rates finally start to rise, or significant further valuation expansion of equities, reducing long-term (potential) returns.”

On a positive note, Oppenheimer says financial markets seem to be pricing in a growing probability of stagnation, particularly in Europe. That means economic conditions might not have to improve much to imply upside potential for equities.

“If, as we expect, growth expectations stabilise, the perception of a ‘risky’ asset might shift to fixed income, given that risk premia are so low and yields have overshot fundamentals.”

Also, and there’s much debate on this, Oppenheimer argues that the multi-year trend of low volatility is likely to continue, despite the recent spike. “With low macro volatility, it is unlikely that market volatility will rise significantly and in a sustained way until valuations become stretched,” he says.

Goldman Sachs isn’t the only major brokerage with a slightly positive global outlook.

Andrew Garthwaite, global equity strategist for Credit Suisse says investors are “too pessimistic on growth”, as “many tactical indicators point to high levels of pessimism” on equities, and “a range of market indicators have over-discounted the economic slowdown”.

He notes that net long positions on S&P 500 futures have fallen to two-year lows, net selling from US company directors is near a three-year low, net buying of shares by corporates is rising, and Credit Suisse’s “equity sentiment indicator” is near a two-year low.

In Europe, “domestic demand indicators have held up much better than industrial indicators, suggesting a possible rebound as destocking ends, bank lending proxies have improved, and much of the external shock from Russia and China has been felt,” Garthwaite says.

And investors’ demand for European cyclical versus defensive equities is the lowest since 2009, while in the US, the market is expecting US manufacturing orders to fall to a level consistent with zero US GDP growth — too pessimistic, according to Garthwaite.

Notwithstanding the Federal Reserve plan to end its bond-buying this month and start lifting interest rates next year if economic conditions allow, Garthwaite argues that massive money-printing in Europe and Japan means that monetary policy globally will become looser, not tighter.

Tuesday’s 11 per cent jump in volatility on Wall Street’s S&P 500 futures shows that financial markets remain jittery.

In Australia, the S&P/ASX 200 has bounced 5 per cent in the past week, having earlier fallen 10 per cent from a six-year peak on August 22.

The market is now waiting to see how much bond-buying the European Central Bank does this month. The results of its “stress tests” of European banks on Sunday will also be key, and after that, attention turns to next week’s Federal Reserve meeting.

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World down but not out, says GE global chief Jeff Immelt
THE AUSTRALIAN OCTOBER 24, 2014 12:00AM

Andrew Main

Wealth Editor
Sydney
Slow but steady

GEGE Global chairman Jeff Immelt, right, in conversation yesterday with Wesfarmers chief Richard Goyder. ‘I think the world’s OK’ Source: News Corp Australia

Slow but steadyGE

THE world economy is not in any danger of total disaster, but we are definitely going to be in a lower growth environment for a while, says Jeff Immelt, global chairman and chief executive of General Electric.

Talking to Wesfarmers chief Richard Goyder at a company event, the man who has run the US giant for 13 years said: “I think the world’s OK.

“ The US is probably the best I’ve seen since the financial crisis (of 2008) and growth is more broadbased — it’s still in the 2-2½ per cent range and maybe that’s the new normal, but it’s ­consistent.

“Europe and Japan are still quite tough: so you have 40 per cent of the world’s economy that’s still finding it difficult, not going downwards, but it’s stable to flat and in many ways that’s probably what we faced over the past year or more, so it’s not like that is extraordinarily different.

“It’s just disappointing that it’s not growing faster. I’d say, on ­balance, it’s positive, and China growing at 7 per cent is still a positive force.’’

The GE chief was sanguine about the number of threats facing the West, noting that on his current trip he had been to Algeria and Turkey before coming to Indonesia and Australia.

“The Middle East and North Africa ... for us will grow by 25 per cent this year. You’re basically flying over a war, going to a country, flying over another war, going to another country, but people there are still investing in electricity.’’

GE’s “big bet’’ of the past 10 years was there would be more than a billion people sooner or later in the global middle-class, needing energy, railway trains and travelling by air. He said that now “it’s real”.

And there were many undeveloped countries that needed basic infrastructure. “Look at Myanmar. Some people still call it Burma and struggle to find it on the map, but it now needs five giga­watts of electricity,’’ he said, making it clear that GE was likely to build the generating plant.

Speaking of the company’s mix between financial services and engineering, he emphasised that GE was “now a $US20 billion oil and gas company’’ and the ­biggest infrastructure technology company in the world. “Financial services should be a smaller part of the portfolio.’’

He said that when he joined GE in 1982 the company made 80 per cent of its sales in the US, and when he took over as CEO in 2001 it was still finding 70 per cent of its business inside the US.

Once GE’s purchase of French engineering group Alsthom was bedded down next year, the reverse would be the case.

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Low oil prices to boost growth: IMF
AFP NOVEMBER 13, 2014 10:06AM

THE fall in oil prices to their lowest levels in more than three years should give a boost to the sagging world economy, the International Monetary Fund says.

In a report to the G20 group of leading industrial powers ahead of the leaders’ summit in Brisbane this weekend, the IMF said the world economy still faces stiff headwinds from a number of areas, particularly sluggish growth in Europe.

But after a nearly 20 per cent fall in prices since September, the Fund said, “all else equal, the recent appreciable fall in oil prices, if sustained, will boost growth.”

OIL: Prices hit new low

The report stuck to the IMF’s 3.3 per cent pace of world growth for this year, and 3.8 per cent next year, citing weakness in the eurozone, more threats from geopolitical tensions and potential sharp corrections and volatility in financial markets.

It also noted that lower oil price is a double-edged sword, hurting countries dependent on crude exports which are already experiencing slower growth, especially Russia.

“Downside risks continue to be associated with geopolitical tensions, further corrections in financial markets, low inflation in some advanced economies, low potential growth globally, and secular stagnation in advanced economies, and US monetary policy normalisation,” the report said.

Overnight (AEDT), US Treasury Secretary Jacob Lew raised pressure on Europe’s leaders ahead of the summit, criticising “status quo policies” and warning that “the world cannot afford a European lost decade.”

The world cannot “rely on the United States to grow fast enough to make up for weak growth in major world economies,” he said in a speech.

AFP

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G20 leaders back $US2trn global growth boost
PUBLISHED: 0 HOUR 48 MINUTE AGO | UPDATE: 0 HOUR 0 MINUTE AGO
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G20 leaders back $US2trn global growth boost
Prime Minister Tony Abbott has insisted that climate change had always been included in the G20 communique. Photo: AP
LAURA TINGLE
More stories from G20
G20 growth boost depends on ‘moral-suasion’
Australia alone with Saudi Arabia on climate change

Leaders of the largest 20 economies in the world have formally endorsed plans that are designed to boost growth by 2 per cent by 2018 – or $US2 trillion – as well as bolster a push to restore multilateral trade negotiations and reinforce the need to address climate change.

In a communiqué released a short time ago, the G20 leaders say raising global growth to deliver better living standards and quality jobs for people across the world is the highest priority.

It came after what Prime Minister Tony Abbott said had been a “very harmonious, constructive and collegial process”, despite clear tensions between many leaders and Russian President Vladimir Putin, who was the first leader to leave Brisbane after a number of “very robust” discussions with world leaders.

The communiqué says leaders “welcome stronger growth in some key economies”.

“But the global recovery is slow, uneven and not delivering the jobs needed,” it says

“The global economy is being held back by a shortfall in demand, while addressing supply constraints is key to lifting potential growth.

“Risks persist, including in financial markets and from geopolitical tensions.

“We commit to work in partnership to lift growth, boost economic resilience and strengthen global institutions”.

The communiqué delivers on Australia’s plan for specific economic growth plans from each member country and progresses its agenda on infrastructure and on addressing tax avoidance.

Despite being audited by the IMF and OECD, there has been scepticism about the plans.

Australia’s own growth plan is comprised of: an infrastructure growth package (including the Asset Recycling Initiative); employment welfare reforms; cutting red tape; contributing to global trade liberalisation (Free Trade Agreements with Korea and Japan) and “creating self-reliant industries over the next four years”.

The most important developments in the communiqué over the leaders’ weekend meeting have been a commitment to boost female participation in the workforce by 25 per cent by 2025, support for trade and energy reform and on climate change.

Against the resistance of Australia, the communiqué says “we support strong and effective action to address climate change”.

Mr Abbott insisted that climate change had always been included in the communique but other nations reported that the wording was subject to intense negotiations with Australia and Saudi Arabia holding out.

It says: “Consistent with the United Nations Framework Convention on Climate Change (UNFCCC) and its agreed outcomes, our actions will support sustainable development, economic growth, and certainty for business and investment.”

“We will work together to adopt successfully a protocol, another legal instrument or an agreed outcome with legal force under the UNFCCC that is applicable to all parties at the 21st Conference of the Parties (COP21) in Paris in 2015.

“We encourage parties that are ready to communicate their intended nationally determined contributions well in advance of COP21 (by the first quarter of 2015 for those parties ready to do so).

“We reaffirm our support for mobilising finance for adaptation and mitigation, such as the Green Climate Fund.”

It also calls for improved energy efficiency as a cost effective way to help address the rising demands of sustainable growth and development.

The G20 has agreed to voluntary collaboration, including new work on the efficiency and emissions performance of vehicles, particularly heavy duty vehicles; networked devices; buildings; industrial processes; and electricity generation; as well as work on financing for energy efficiency.

“We reaffirm our commitment to rationalise and phase out inefficient fossil fuel subsidies that encourage wasteful consumption, recognising the need to support the poor.”

Mr Abbott told a press conference that under Australia’s chairmanship, “the G20 has delivered real, practical outcomes and, because of the efforts that the G20 has made, this year, culminating in if last 48 hours, people right around the world are going to be better off and that’s what it’s all about, it is all about the people of the world being better off through the achievement of inclusive growth and jobs”.

“That’s what it’s all about. This Brisbane summit and indeed the whole year of Australia’s G20 presidency has not just been about bold ideas, it’s been about strong execution as well.

“We set a goal, we developed a plan, and we believe we have implemented it.

“When Australia’s presidency began, we identified three key themes – first boosting growth and employment, second enhancing global economic resilience and third strengthening global institutions.

“We believe – I think all the G20 members believe – by think we put it into practice this year, that we can do more for our people and for the wider world when we work together than when we work separately. In partnership I believe that we have very substantially delivered on those three themes that we identified. We have signed off on a peer reviewed growth package that, if implemented, will achieve a 2.1 per cent increase in global growth over the next five years, on top of business as usual.”

US President Barack Obama welcomed the G20 countries’ strategies to increase growth and put people back to work, particularly on building infrastructure.

“Our nations made commitments that could bring another 100 million women into our collective workforce,” he said.

“We took new steps towards strengthening our bank, closing tax loop hoes and stopping tax evaders and criminals.

“These were all very specific provisions, these were not goals that were set without any substance behind them.

“We have made very concrete progress during the course of last several G20 sessions and preventing companies from avoiding the taxes that they owe in their home country, including the United States, and making sure we have a financial system that is more stable and that can allow a bank to fail without taxpayers having to bail them out.”

The Australian Financial Review

BY LAURA TINGLE
Laura Tingle
Laura Tingle, The Australian Financial Review's political editor, has worked in the parliamentary press gallery in Canberra for more than 25 years. Laura has won two Walkley awards and the Paul Lyneham Award for Excellence in Press Gallery Journalism and has also been highly commended by the Walkley judges for investigative reporting.

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When growth resumes, its only natural to see higher rates... normalisation

Higher rates mean normalisation, OECD chief says
PUBLISHED: 3 HOURS 43 MINUTES AGO | UPDATE: 0 HOUR 39 MINUTES AGO


JACOB GREBER AND EDDY MEYER
Joe Hockey puts growth before climate action
More stories on G20
Rising interest rates – primarily in the United States – would be a welcome sign that normalisation of the world’s economy was under way, according to OECD secretary-general Angel Gurria.

Mr Gurria told Nine’s Financial Review Sunday an increase in the cost of money would also be a sign Australia’s major trading partners were again expanding after years of lacklustre growth following the 2008 global financial crisis.

“[Australians] will benefit from the fact that their major trading partners are going to be buying more raw materials,” he said, noting prices may also recover.

Expectations have been raised over a Group of 20 plans to boost global growth by at least 2 per cent, potentially 2.1 per cent, over five years.

If successful, the boost should lead to strengthening expansions across the world’s biggest economies, including that of the euro zone, Japan and US – eventually leading to higher interest rates.

“Increasing interest rates to the projected level of somewhat higher inflation is a good thing because it means we are going to normalise,” Mr Gurria said. “Normal is good. OK.”

The secretary-general of the Organisation for Economic Cooperation and Development said he was particularly hopeful a recovery in Europe would see “solid increases in interest rates,” but conceded that was still likely to be some time away.

He said there was also confusion in markets over US monetary policy, which has come to the end of its tapering business.

However, while the US was no longer stimulating growth through its bond-buying program they were not about to begin restraining growth.

“They’re going to follow carefully,” he said.

The Australian Financial Review

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http://www.businesstimes.com.sg/governme...n-the-cold

Sputtering manufacturing leaves Asian economies in the cold
November's PMI reports were largely dismal across Asia, particularly in Indonesia, South Korea and China

By
Kelly Taykellytay@sph.com.sg@KellyTayBT
IF Monday's flurry of disappointing manufacturing data is anything to go by, there'll be little festive cheer for regional economies. What's on the table could be a softer end to 2014 and a slow start to 2015. PHOTO: BLOOMBERG
2 Dec5:50 AM
Singapore

IF Monday's flurry of disappointing manufacturing data is anything to go by, there'll be little festive cheer for regional economies. What's on the table could be a softer end to 2014 and a slow start to 2015. (see infographic)

November's Purchasing Managers Index (PMI) reports were largely dismal across Asia, and particularly so in places like Indonesia, South Korea and China. With operating conditions worsening amid tepid year-end demand, the latest set of falling PMIs suggests that the region's manufacturers continue to struggle.

Said CIMB economist Song Seng Wun: "We're well into the final quarter of 2014 and with the kind of PMI readings we're seeing so far, it suggests that we're going to end the year with a bit of a whimper as far as factory activities are concerned. It reflects a softer end to the year in terms of global demand and global growth, and a weaker beginning to 2015 too."

For one, Indonesia's PMI fell 1.2 to 48.0 in November, sinking to a record low in the survey's 44-month history. The overall deterioration was driven by strong contractions in output and new orders, along with a moderate reduction in employment.

South Korea posted a reading below 50 as well - signalling a contraction in the manufacturing sector - with a slight 0.3 rise to 49.0. New orders declined, alongside a further deterioration in production. Operating conditions faced by South Korean manufacturers have now worsened for the third consecutive month.

And while Japan, Taiwan and China's readings crossed the 50-point mark last month - a reading above 50 denotes growth in the manufacturing sector - all three showed a further loss of growth momentum.

Japan's PMI eased to 52.0 in November from 52.4 the month before. Taiwan's 51.4 reading marked a 15-month low and a drop from October's 52.0. In China, both the official and private PMI surveys showed a fall in readings - down 0.5 to 50.3 and down 0.4 to 50.0 respectively.

Noted UOB economist Francis Tan: "Typically China sees a boost to manufacturing before the Chinese New Year period, so November's poor readings show that sentiment on the ground is pretty bleak."

There was also news on Monday that factory activity contracted in the eurozone's three biggest economies of Germany, France and Italy. Said CIMB's Mr Song: "Outside of the US, there's really nothing to write home about."

Added Bank of America Merrill Lynch economist Chua Hak Bin: "(November's readings) give us a sense that this global recovery story is still pretty shaky. Europe and Japan's recoveries are weak, as is demand from China. There's not much Christmas cheer this year, and Singapore could disappoint as well."

Singapore's November PMI reading will be released on Tuesday night by the Singapore Institute of Purchasing & Materials Management (SIPMM). Private-sector economists polled by Bloomberg are expecting a reading of 51.6 after October's three-and-a- half-year high of 51.9.

But Dr Chua isn't convinced that Singapore's relatively higher PMI readings will translate into a better industrial production and exports performance. Indeed, a recent note from Capital Economics analyst Krystal Tan noted that Singapore's PMI "doesn't help much in estimating the rate of manufacturing output growth".

Singapore's trade ministry signalled last week that it expects growth to "ease slightly" for the rest of 2014, in line with a projected slowdown in the global economy. It expects fourth-quarter GDP growth of 2.2 per cent year-on-year.

Still, bright spots emerged from Vietnam and India. The former's PMI was up 1.1 to 52.1 in November, as output and new orders rose at faster rates and stocks of purchases increased at the sharpest pace in the survey's history.

India's PMI rose from 51.6 to 53.3 - a 21-month peak - supported by stronger output growth. Foreign orders and buying activity also rose while employment remained broadly stable. "However, a cautionary note was provided by survey data regarding input costs and output charges, as inflationary pressures intensified," said a Markit Economics report.

*China's November PMIs slip further, jobs under stress

*Japan's recession less serious than thought

*HK Oct retail sales dip as protests hit core shopping areas

[CityFarmer]

IMF's view on the recent oil price decline...

IMF says lower oil prices positive for global economy

WASHINGTON - Falling oil prices are positive for the global economy as a whole, though they may hurt individual commodity exporters, IMF Managing Director Christine Lagarde said on Monday.

"Assuming we have a 30 percent decline (in oil prices), it's likely to be an additional 0.8 percent (in economic growth) for most advanced economies, because all of them are importers of oil," Lagarde said, mentioning the United States, Europe, Japan and China in particular.

World oil prices are down 40 percent since June, largely on abundant supply. OPEC also declined last week to cut production to bolster prices, sending Brent crude prices to a five-year low this week.

But Lagarde warned falling crude prices were hitting some oil exporters particularly hard, especially Russia, Iran, Venezuela and Nigeria, leaving their economies vulnerable.

"All countries that will be affected significantly by the decline in the oil price, which are producers of oil, I think should be under watch," Lagarde said at a Wall Street Journal conference. "Venezuela is clearly one ... where it could be difficult."

The South American member of OPEC derives 96 percent of its export revenues from oil, so the drop in prices has hit exacerbated a national economic decline, a foreign currency shortage and a scarcity of basic goods. REUTERS
http://www.todayonline.com/business/imf-...al-economy

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This is simple logic... with crawling growth and massive unemployment rates around the globe... prices of inputs need to adjust... no rocket scientists...

IMF's view on the recent oil price decline...

IMF says lower oil prices positive for global economy

WASHINGTON - Falling oil prices are positive for the global economy as a whole, though they may hurt individual commodity exporters, IMF Managing Director Christine Lagarde said on Monday.

"Assuming we have a 30 percent decline (in oil prices), it's likely to be an additional 0.8 percent (in economic growth) for most advanced economies, because all of them are importers of oil," Lagarde said, mentioning the United States, Europe, Japan and China in particular.

World oil prices are down 40 percent since June, largely on abundant supply. OPEC also declined last week to cut production to bolster prices, sending Brent crude prices to a five-year low this week.

But Lagarde warned falling crude prices were hitting some oil exporters particularly hard, especially Russia, Iran, Venezuela and Nigeria, leaving their economies vulnerable.

"All countries that will be affected significantly by the decline in the oil price, which are producers of oil, I think should be under watch," Lagarde said at a Wall Street Journal conference. "Venezuela is clearly one ... where it could be difficult."

The South American member of OPEC derives 96 percent of its export revenues from oil, so the drop in prices has hit exacerbated a national economic decline, a foreign currency shortage and a scarcity of basic goods. REUTERS
http://www.todayonline.com/business/imf-...al-economy