Global growth expected to remain fragile - IIF

MANILA, Philippines - Global growth is expected to remain fragile as global financial markets took a turn for the worse last year and in the early part of this year, according to the Institute of International Finance (IIF).

The IIF is the world’s only global association of financial institutions. Members include most of the world’s largest commercial banks and investment banks as well as a growing number of insurance companies and investment management firms.

In its latest Global Economic Monitor, IIF said a string of weaker than expected growth indicators coincided with renewed market risk aversion in the run up to the second quarter of the year.

As such, IIF said that the global economy especially in the euro area may remain turbulent.

 “These developments support our forecast of continued fragile global growth. The outlook also continues to be one of divergence-both between mature and emerging markets and among mature economies and, importantly, within the euro area,” the IIF said.

It noted that in Europe, the main worry is the impact on the regional economy of the Greek restructuring. This, the IIF said, would have an impact over three to five year horizon.

This has prompted IIF to revise downward its economic growth forecast for the euro area to 0.9 percent from 1.3 percent for 2013.

With this, it expects the European central bank to lower its policy rate in the second half once it becomes apparent that growth is slower.

In the Asia-Pacific region, the IIF expects global growth to slow down to 7.3 percent this year from 7.6 percent last year. It expects the region’s economy to grow faster with a 7.7 percent growth in 2013.

In the region, China is expected to lead the growth with an 8.4 percent expansion this year and an 8.8 percent in 2013.

India, another major economic power in the Asia-Pacific bloc, meanwhile, is projected to grow by seven percent this year and in 2013 from the 6.9 percent growth recorded last year.