The International Monetary Fund said that a larger-than-expected weakening in the world’s second-largest economy would pose risks to the global financial system, as the lending body lowered its 2019 forecast for economic growth worldwide, Caixin reports.
In the latest World Economic Outlook (WEO) report, the IMF projected that the world economy will grow by 3.5% this year, down from the previous 3.7% forecast. The initial forecast was 3.9% earlier in 2018.
The China growth forecast held at 6.2% in 2019, after being cut in October as effects of trade tensions and tighter financing conditions became clearer. This would be a notable drop from the 6.6% growth recorded for 2018, which was already the lowest annual pace since 1990.
“Concerns about the health of China’s economy can trigger abrupt, wide-reaching sell-offs in financial and commodity markets that place its trading partners, commodity exporters, and other emerging markets under pressure,” the report said.
Managing Director Christine Lagarde also said that the IMF continues to “flag that it is important for China to ring-fence its financial sector to make sure that credit growth is sustainable, that there is financial regulatory reform, and there is still rebalancing of the economy away from industry services.”