The global economy appears to be gaining momentum, but a handful of downside risks remain, says the Institute of International Finance (IIF) in its latest economic forecast.
The IIF, which is the global lobby group for the banking industry, said Friday the recovery has improved lately, bolstered by lower oil prices. However, it says that the recovery “remains underpowered, uneven and fragile and financial markets are likely to remain jittery.”
The group projects global growth to rise to 3.1% in 2015 from 2.6% this year. Still, it stresses that economic policy is key to putting the recovery on a more solid footing.
“We do now see welcome signs that global growth is finally picking up, but momentum is still slow “, said Charles Collyns, IIF chief economist, “We are concerned that the recovery could again falter, without more growth friendly policies. Most importantly, the Euro Area needs to follow through on its efforts to support demand, and the Fed should continue to move cautiously as it heads towards raising interest rates. Moreover, supply side reforms are essential in a number of mature and emerging economies, including in all of the BRICs.”
The top six risks for the global economy, according to the IIF, include the prospect of a sharp bond market correction driven by rising U.S. interest rates; the intensification of country specific problems and contagion risks in emerging markets; slow recovery and persistent low inflation in Europe; the prospect of a substantial growth slowdown, and delayed reform, in China; geopolitical risk in the Ukraine; and, risks to reform in Japan.