IMF Downgrades US Growth, Russia Up

The International Monetary Fund is downgrading its forecast for the US economy this year because business investment has proved weaker than expected.

The IMF cut its estimate for US economic growth in 2016 to 1.6% from the 2.2% it had predicted in July, AP reported.

Its dimmer outlook occurs even as the Federal Reserve is thought to be edging toward a move to raise interest rates in December.

Behind the slump in US business investment, the IMF says, are cutbacks in the energy industry, a strong dollar that is depressing exports and “policy uncertainty” related to the November elections.

The IMF says sluggishness in the United States has been offset by improving prospects among developing economies. It left unchanged its forecast for overall global growth this year at 3.1%.

Meanwhile, Russia’s economic outlook has improved recently thanks to higher oil prices but a lack of reforms means its longer-term prospects still look bleak, the IMF said.

Russia’s gross domestic product is now seen falling 0.8% in 2016 before growing 1.1% in 2017, the IMF said. In the previous semi-annual report in April, the Fund had predicted GDP would shrink by 1.8% this year and grow by 0.8% next year.

“Russia’s economy shows signs of stabilization as it is adjusting to the dual shock from oil prices and sanctions, and financial conditions eased after bank capital buffers were replenished with public funds,” the IMF said.

The revision brings the Fund’s figures closer to Moscow’s official view as the international institution priced in the latest recovery in prices for crude oil, Russia’s key export.