In the face of weaker-than-expected global growth for the first half of 2014 and increased downside risks, growth may again fail to pick up or may fall short of expectations, Doha Bank Group CEO, Dr R Seetharaman has said.

The International Monetary Fund now forecasts global growth to average 3.3% in 2014 and to rise to 3.8% in 2015.

“The weaker growth outlook for 2014 than IMF July 2014 forecast, which was at 3.4% in 2014 and 4% in 2015 respectively, reflects setbacks to economic activity in the advanced economies during the first half of 2014, and a less optimistic outlook for several emerging market economies,” Seetharaman said in the context of the IMF World Bank Annual Meeting which is now being held at Washington, DC.

In advanced economies, the legacies of the pre-crisis boom and the subsequent recession, notably high debt burdens and unemployment, still cast a shadow on recovery, and low potential growth ahead is a concern. Several emerging markets are also adjusting to lower potential growth.

In advanced economies, growth is forecast to rise to 1.8% in 2014 and 2.3% in 2015 when compared to the IMF July forecast of 1.8% in 2014 and 2.4% in 2015.

The projected strengthening in activity reflects faster growth in the US following a temporary setback in the first quarter of this year. Employment growth has been strong, and household balance sheets have improved amid favourable financial conditions and a recovering housing market.

US economic growth has been revised upwards to 2.2% for 2014 and 3.1% for 2015. It was at 1.7% for 2014 and 3% for 2015 in the IMF July 2014 forecast.

“We have seen the US dollar strengthening in recent times on hopes of US economic recovery and the Federal Reserve bringing down its quantitative easing programme and the dollar index above 85. UK economic growth is at 3.2% for 2014 and 2.7% for 2015, which is similar to the IMF July 2014 forecast for both the years,” Seetharaman said. In the euro area, recent growth disappointments highlight “lingering fragilities”.

A gradual, but weak recovery is projected to take hold, supported by a sharp compression in interest spreads for stressed economies and record-low long-term interest rates in the core euro area economies, he said.

The euro area economic growth has been brought down to 0.8% for 2014 from 1.1% in the IMF July 2014 forecast. The euro region’s growth for 2015 has been brought down to 1.3% from 1.5% in the IMF July 2014 forecast. The slow recovery has prompted the European Central Bank to pursue fresh easing measures. The euro continues to weaken on account of slow growth and easing measures pursued by the ECB, Seetharaman said.

In Japan, GDP contracted more than expected in the second quarter of 2014 in the wake of an increase in the consumption tax. Looking ahead, private investment is forecast to recover and growth to remain broadly stable in 2015. Japan’s economic growth has been brought down to 0.9% for 2014 from 1.6% in the IMF July 2014 forecast. Japan’s 2015 economic growth brought down to 0.8% from 1.1% in the IMF July 2014 forecast.

In advanced economies, secular stagnation and low potential growth continue to be important medium-term risks—despite continued very low interest rates and increased risk appetite in financial markets. The secular stagnation situation has arisen due to a persistent shortfall of investment relative to saving, even with near-zero interest rates, Seetharaman said. Deflation, particularly in the euro area, could pose a risk to activity and debt sustainability in some countries, he added. The emerging and developing economies still account for the lion’s share of global growth at 4.4% for 2014 and 5% for 2015, which is lower than the IMF July forecast of 4.6% for 2014 and 5.2% for 2015 respectively.

In China, growth is expected at 7.4% in 2014 and 7.1% in 2015, as the economy transitions to a more sustainable path, which is similar to the IMF July 2014 forecast for both the years. Growth is expected to remain strong elsewhere in emerging and developing Asia, Seetharaman said.

India is expected to grow at 5.6% in 2014 and 6.4% in 2015. The 2014 growth has been marginally revised upwards when compared to the IMF July 2014 forecast, which was at 5.4%.

Brazil is expected to grow at 0.3% in 2014 and 1.4% in 2015 and has revised down from the IMF July forecast of 1.3% in 2014 and 2% in 2015.

Russia is expected to grow at 0.2% in 2014 and 0.5% in 2015. The 2015 growth rate has been brought down from 1% in the IMF July 2014 forecast to 0.5%.