Setting the stage for the annual meetings of the International Monetary Fund and the World Bank, the IMF cut its 2015 growth forecast for the world economy Tuesday to 3.1 percent, predicting the worst year since the global recession of 2009.
The downward revision will provide a gloomy backdrop as economic policymakers from 188 countries meet in the Peruvian capital Lima from Friday to Sunday.
“The holy grail of robust and synchronized global expansion remains elusive,” said the IMF’s new chief economist, Maurice Obstfeld, warning that China’s slowdown and the resulting slide in commodity prices was weighing down the world economy.
There is “reason to be concerned,” IMF managing director Christine Lagarde warned in the run-up to the meeting.
After decades of break-neck expansion, the world’s second-largest economy is set to slow to 6.3-percent growth next year, its lowest rate in 25 years, the IMF predicted.
And that is taking a heavy toll on other emerging markets, which had grown to depend on China’s voracious appetite for their fuel, metals, minerals and other commodities.
The emerging markets, which drove global growth during the crisis of 2008-2009, are also hurting because their capital inflows are drying up as a recovering United States prepares to tighten monetary policy.
The gloomy outlook tempers the good news last weekend from the World Bank, which reported that extreme poverty will fall this year to less than 10 percent of the global population for the first time.
The economic pain is particularly acute in Latin America, which had not hosted the IMF annual meeting since the 1967 edition in Rio de Janeiro, Brazil.
The IMF forecast a recession of 0.3 percent in Latin America this year, and regional powerhouse Brazil is facing a contraction of three percent.
Climate, taxes, Sean Penn
The fifth annual slowdown for the once-mighty emerging markets and the commodities plunge underpinning it will be key agenda points as finance ministers from the leading industrialized and emerging economies gather Thursday for a G20 meeting, before issuing a statement Friday.
An entire neighborhood of Lima has been closed off with military checkpoints for the occasion, leaving the streets bizarrely empty in the normally traffic-jammed city and creating headaches for commuters.
The cordon will keep any protesters well away from the movers and shakers who drive the global economy.
But the latter will still get a chance to see the poverty and inequality that trouble Peru and Latin America: The windows of the National Museum, the massive concrete building hosting the meeting, afford a view of one of the slums that surround Lima.
The scene is emblematic of international charity Oxfam’s recent finding that the richest one percent of the population in Latin America owns 41 percent of the region’s wealth.
Indeed, inequality is a hot topic in the long list of events and panels scheduled around the meeting, which will get a celebrity boost when actor Sean Penn jets in to discuss his humanitarian work.
But concrete progress is more likely to come on another major issue: the fight against climate change.
With two months to go to key UN climate talks in Paris, the Organization for Economic Cooperation and Development (OECD) is due to publish a report Wednesday on progress toward reaching the global funding target of $100 billion a year to fight the impacts of global warming.
Another talking point will be the OECD’s new plan to crack down on tax avoidance worldwide, after it declared Monday that “playtime is over” for multinational corporations that stiff countries on more than $100 billion a year.
The G20 finance ministers must give the plan the green light in Lima and pass it on to their bosses for final approval, expected in November at a G20 summit in Turkey.