Alsumaria News/Baghdad
In an article published by the German newspaper Handelsblatt, Managing Director of the International Monetary Fund, Christine Lagarde, stated that global economic growth will be “disappointing” next year.
Lagarde believes that the likelihood of interest rate hikes in the United States and the economic slowdown in China are factors contributing to the uncertainty and increasing the risk of a weakening global economy.
Lagarde said, “In addition, global trade growth has slowed significantly, and the decline in commodity prices has created problems for economies that rely heavily on them.” She also noted that the financial sector continues to suffer from vulnerabilities in many countries, and financial risks are increasing in emerging markets.
The interest rate in the United States was raised for the first time in ten years.
Lagarde added, “All of this means that global growth will be disappointing and uneven in 2016,” pointing out that “weak production, aging societies, and the effects of the global financial crisis are all factors hindering growth.”
Lagarde said that “the beginning of the return of US monetary policy to its normal state, and China’s shift towards consumption-driven growth are two necessary and healthy changes, but they need to be carried out as efficiently and smoothly as possible.”
Lagarde pointed out that “there are potential side effects that are added to what the likelihood of raising interest rates has already contributed to, by increasing the cost of financing for some borrowers, including emerging markets.”
Lagarde warned that “raising US interest rates and the strength of the dollar could lead to companies defaulting and failing to repay their debts, and banks and countries could be affected.”