Sluggish growth casts shadow over world economic outlook

As finance policymakers from around the world gather this week in Washington, they are faced with a gloomy world economic outlook that calls for immediate action to boost growth and consumption.

The International Monetary Fund (IMF), in a report released this week, has lowered its forecasts for global growth in 2016 by 0.2 points to 3.2 percent. The downgraded forecasts reflect a broad-based slowdown across different country groups.

"Growth has been too slow for too long," IMF's chief economist Maurice Obstfeld said, describing the pace of growth as "increasingly disappointing."

"Persistent slow growth has scarring effects that themselves reduce potential output and with it, demand and investment," he said.

The IMF's chief Christine Lagarde has previously said that the recovery remains too slow and fragile, describing the current state of the world economy as "the new mediocre."

Growth in advanced economies is hampered by weak demand, partly held down by unresolved crisis legacies, as well as unfavorable demographics and low productivity growth, according to the IMF.

While emerging markets and developing economies will still account for the lion's share of world growth this year, the IMF said, prospects across countries remain uneven and generally weaker than over the past two decades.

The IMF also listed a number of noneconomic risks that could worsen the world economy, including geopolitical conflicts, political discord, terrorism, refugee flows and global epidemics.

Particularly, it has expressed concerns over Britain's planned referendum on its European Union membership, warning that a British exit could do severe regional and global damage by disrupting established trading relationships.

To support global growth under the current economic situation, the IMF calls for a more potent policy mix -- a three-pronged policy approach based on structural, fiscal, and monetary policies.

With growth in advanced economies expected to remain modest, the world economy will depend on emerging economies, especially China, to maintain relatively high growth.

The IMF said the Chinese economy is expected to expand 6.5 percent in 2016 and 6.2 percent in 2017, both up 0.2 percentage point from the predictions in January. It also said a successful rebalancing of China' s economy is likely.

The upgrade reflects China's announced policy stimulus and the trend of robust growth in the service sector offsetting weakness in manufacturing, said the IMF.

China's efforts to ensure policy transparency as well as a smooth transition will support global growth, Obstfeld said, who also called on China to further reform its state-owned enterprises, deal with non-performing loans, and strengthen regulatory framework.

David Dollar, senior fellow at the John L. Thornton China Center, Brookings Institution, said that macroeconomic measures put in place by the Chinese government have helped stabilize the economy, an improvement from several months ago when many were worried about "a hard landing."