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maltatoday, WEDNESDAY, 21 JANUARY 2015 11 Business Today The International Monetary Fund (IMF) has lowered its forecast for global economic growth for this year and next. The IMF now expects growth of 3.5% this year, compared with the previous estimate of 3.8%, which it made in October. The growth forecast for 2016 has also been cut, to 3.7%. The downgrade to the forecasts comes despite one major boost for the global economy - the sharp fall in oil prices, which is positive for most countries. The IMF expects that to be more than offset by negative factors, notably weaker investment. That in turn reflects diminished expectations about the growth prospects for many developed and emerging economies over the next few years. If business expects weaker growth, there is less opportunity to sell goods and services and so less incentive to invest. The eurozone is a case in point. The IMF does expect the recovery there to continue, but not strongly. It is estimating growth of 1.2% in the euro area this year and 1.4% in 2016. For the European Central Bank, the immediate priority is to tackle the deflation, or falling prices, now under way. The IMF's chief economist, Olivier Blanchard, said deflation was an adverse and worrying force, but it was "not the kiss of death… in itself, it's not going to derail the recovery". However, he acknowledged that it was possible that deflation could set off the eurozone's debt crisis once again. Falling prices are particular problem for debtors, because their incomes - or for governments, their tax revenues - may fall, but the debt payments often do not. The slowdown in China is another factor behind the revised forecasts. On Tuesday, official figures showed that China's growth slowed to 7.4%last year, from 7.7% in 2013. Next year, the IMF growth forecast for China is 6.3%, compared with an average of 10% over the three decades up to 2010. Blanchard said the IMF was "fairly confident that is going to be an orderly slowdown". The report says that slower growth in China will have important effects in other emerging economies in Asia. www.creditinfo.com.mt info@creditinfo.com.mt Tel: 2131 2344 Your Local Partner for Credit Risk Management Solutions Supporting you all the way German investor confidence rises again in January German investor confi dence rose for the third month in a row in January, hitting its highest level since February 2014, a survey suggests. The closely followed poll by German think tank ZEW rose to 48.4 points this month, up from 39.4 in December. Falling oil prices and a weak euro boosted sentiment, ZEW said. The better-than-expected rise comes ahead of Thursday's European Central Bank meeting, where it is due to take action to boost the eurozone economy. The central bank is increasingly expected to launch a new round of economic stimulus measures, or quantitative easing (QE). The bank has so far resisted pressure to follow in the footsteps of central banks in the UK, US and Japan by stimulating the eurozone economy through the purchase of government bonds. In part, this has been because of opposition from Germany, which has argued that asset purchases of this type are outside of the ECB's remit. But official figures in January, showing inflation in the eurozone had turned negative for the first time since the depths of the financial crisis in 2009, mean many analysts now think action is inevitable. It is hoped that pumping more money into the financial system will raise inflation and boost the wider economy. The ECB meeting comes three days before a snap election in Greece, caused by the failure of the country's parliament to elect a president and concerns that the country might leave the eurozone. Greek anti-austerity party Syriza is leading in opinion polls and has pledged to renegotiate the terms of Greece's €240bn (£184bn; $278bn) bailout from the European Union and International Monetary Fund. Jennifer McKeown of Capital Economics attributed ZEW's rise despite the current turmoil to the expectation of action from the ECB. "Presumably any worries about the effect of the Greek crisis on the German economy were offset by expectations of ECB quantitative easing and hopes of a boost to exports from the weakening euro," she said. IMF downgrades global growth forecast