Investing.com - The International Monetary Fund cut its global growth forecasts for the next two years on Tuesday and warned that economic turmoil in China could derail economic growth.
In an update to its World Economic Outlook, the IMF downgraded its forecast for global growth to 3.4% this year and 3.6% in 2017 from 3.6% and 3.8% in October.
The fund said risks to the global outlook remain tilted to the downside, amid slowing growth in China and the emerging market economies and the Federal Reserve’s policy tightening.
Global financial markets have been roiled this year by fears over a slowdown in China, the world’s second-largest economy.
Weakening global demand and plunging commodity prices have also soured the economic outlook, particularly in emerging markets.
The IMF left its estimate for Chinese economic growth unchanged at 6.3% this year and 6% in 2017.
IMF Chief Economist Maurice Obstfeld said global financial markets seem to be overreacting to falling oil prices and China, but added that it was critical that China is clear about its overall policy strategy, including its currency.
The fund trimmed its forecast for U.S. growth this year to 2.6%, from 2.8% in October, warning that the strong dollar was weighing on manufacturing.
The IMF raised its growth forecast for the euro zone economy to 1.7% this year, from 1.6% in October.
However, the fund said there are clear deflationary pressures in the region and added that it still expects further easing from the European Central Bank.