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Watch Out Below, Citi Cuts 2016 Global Growth Forecast Even Lower

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Watch Out Below, Citi Cuts 2016 Global Growth Forecast Even Lower

  • Citi has issued its fourth consecutive cut to its 2016 global growth forecast.
  • The firm believes that emerging market weakness is merely a mid-cycle slowdown and not a major downturn.
  • Citi now projects the first Fed rate hike will come in spring of 2016.
  • Citi Research has once again cut its global growth forecast through the end of 2016. In a new report, analyst Willem Buiter explained why Citi’s outlook has become bleaker in recent months and what Citi’s latest projections mean for global investors.

    The Numbers

    Citi’s latest projections call for only 2.6 percent global growth in 2015, down from the 2.7 percent projection the firm issued a month ago. In addition, Citi’s 2016 growth forecast dropped to 2.9 percent, down from 3.1 percent one month ago and 3.5 percent four months ago.

    The latest downgrade marks Citi’s fourth consecutive 2016 growth downgrade. Citi's largest growth downgrades were issued to Argentina, Brazil, Korea, Russia, Nigeria and Turkey.

    Related Link: Citi Continues To Lower Global Growth Estimates

    The Good News

    Despite the downgrades, Citi believes that, as far as U.S. and European investors are concerned, the weakness in emerging markets is more likely a mid-cycle slowdown than a significant downturn.

    “However, unlike the late 1990s EM crisis, we do not expect EM weakness to be followed by a V-shaped rebound in advanced economies, because of the higher weight of Ems in global growth, the relative paucity of monetary policy options for powerful stimulus among advanced economies, plus the widespread overhang of high public and private debt levels,” Buiter explained.

    Outlook

    Based on the latest projections, Citi now has a relatively dovish outlook for monetary policy. The firm is calling for the first Federal Reserve rate hike in spring 2016 and sees further easing in coming months In Europe, Japan and China.

    Image Credit: Public Domain

    Posted-In: Citi Willem BuiterAnalyst Color Emerging Markets Economics Federal Reserve Markets Analyst Ratings Best of Benzinga

     

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