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IMF head warns of weaker global growth

Christine Lagarde, IMF Image copyright Getty Images

The head of the International Monetary Fund has warned global growth is likely to be weaker this year than last.

Christine Lagarde also said she expected there would be only a modest acceleration in 2016.

And she warned there could be an economic "vicious cycle" caused by higher US interest rates and the Chinese slowdown.

She said these threats could jeopardise recent economic gains in Asia, Latin America and Asia.

Ms Lagarde was addressing the Council of the Americas ahead of next week's IMF and World Bank annual meetings and the release of the Fund's World Economic Outlook on Tuesday.

She said: "The good news is that we are seeing a modest pickup in advanced economies. The moderate recovery is strengthening in the euro Area; Japan is returning to positive growth; and activity remains robust in the US and the UK as well.

"The not-so-good news is that emerging economies are likely to see their fifth consecutive year of declining rates of growth."

'Rapid drop'

She added: "On the economic front, there is ... reason to be concerned. The prospect of rising interest rates in the United States and China's slowdown are contributing to uncertainty and higher market volatility.

"Rising US interest rates and a stronger dollar could reveal currency mismatches, leading to corporate defaults... and a vicious cycle between corporates, banks, and sovereigns," Ms Lagarde added.

She also pointed to the "sharp deceleration" in the growth of global trade and the "rapid drop" in commodity prices, which is damaging the finances of commodity-exporting emerging market economies.

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