IMF: The World Is at Risk of “Economic Derailment”

The IMF warned that the global economy is at risk of “economic derailment” and its deputy director David Lipton called for urgent steps to boost global demand.

"We are clearly at a delicate juncture," said Lipton to the National Association for Business Economics in Washington on Tuesday.

He warned that according to the IMF's latest reading of the global economy shows once again a weakening baseline.

These comments were made after weaker-than-expected trade figures from China that showed that exports in February fell by a quarter since last year.

The world’s second largest economy is often referred to as as "the engine of global growth", weaker global demand for its goods is considered to be an indicator of the general global economic climate.

The IMF has already said it is likely to downgrade its current forecast of 3.4% for global growth when it releases its economic predictions next month.

In February, the international lender had issued a warning that the world economy was "highly vulnerable" and called for new efforts to encourage growth.

According to an IMF report ahead of last month's Shanghai G20 meeting, the lender said the group should plan a co-ordinated stimulus programme as world growth had slowed and could be derailed by market turbulence, the oil price crash and geopolitical conflicts.

During his speech in Washington, Mr. Lipton also said: "The burden to lift growth falls more squarely on advanced economies" which have fiscal room to move.

"The downside risks are clearly much more pronounced than before, and the case for more forceful and concerted policy action, has become more compelling."

"Moreover, risks have increased further, with volatile financial markets and low commodity prices creating fresh concerns about the health of the global economy," he added.

The downbeat picture is one that has continuingramifications for businesses and industries that bet on China's growth story.

Last Year Brazil’s Economy Contracted by 3.8%

According to the national statistics agency IBGE, the country’s GDP fared worse than most other major economies in 2015, shrinking by 3.8%.

Economic growth in the world's seventh-largest economy has fallen sharply in recent months.

This was due partly to low commodity prices and sluggish global growth.

But political paralysis has hampered Brazil's efforts to tackle its economic problems, including a budget deficit that has reached 10.8% of GDP.

President Dilma Rousseff is trying to head off the opposition's efforts to impeach her over alleged accounting irregularities, which means she cannot afford to alienate supporters in her Workers' Party by cutting spending or raising taxes.

Investigations are also continuing into a high-level bribery and corruption scandal involving major construction projects. Ms Rousseff's predecessor as president, fellow Workers' Party politician Luiz Inacio Lula da Silva, is one of the people under investigation.

What a contrast with the optimism of the 2000s. That was when the term Brics was coined, covering the largest emerging economies, including Brazil, which were seen as major contributors to global economic growth.

Among the group today, India is still performing strongly, but China has slowed - and many economists say by much more than the official figures suggest.

Russia's economy contracted by a similar amount to that of Brazil last year, and South Africa - a later addition to this group - managed a very lacklustre 1.3% growth last year.

These figures do pose the question: is this dip in emerging economies' performance just that - a temporary dip. Or is it a longer-term transition to slower growth?

Some factors, such as Brazil's political crisis, may pass, but on the wider question for the emerging economies, the jury is still out.