JAKARTA - Global economic growth is likely to be weaker than earlier anticipated due to a further slowdown in developing economies, fears over China's economic outlook and the increasing prospects of the US Federal Reserve raising interest rate and its impact on emerging economies,  International Monetary Fund head said here Tuesday.

 

"Overall, we expect global growth to remain moderate and likely weaker than we anticipated last July. This reflects two forces: a weaker than expected recovery in advanced economies, and a further slowdown in emerging economies, especially in Latin America," IMF chief Christine Lagarde said in a speech at the University of Indonesia.

"Asia as a region is still expected to lead global growth. But even here, the pace is turning out slower than expected with the risk that it may slow even further given the recent spike in global risk aversion and financial market volatility," she said.

The IMF cut its global economic forecasts in July to a growth of 3.3 percent in 2015, down from 3.4 percent in 2014. The projection compares with a 3.5 percent forecast made by the IMF back in April this year and 3.4 percent in July 2014. The next global health report is expected in October.

Besides the slowdown in pace of growth in developing economies, Largarde said there are other contributing factors for the lower growth projection including lower commodity prices which is going to adversely impact several developing economies.

"Commodity prices have come off their peak, and this decline is projected to persist," said the IMF chief, who is visiting Indonesia for the first time in three years. She warned that the trend is likely to see weaker demand for goods from emerging economies like Indonesia that "for some time to come".

"There is yet a third shiftunfolding in advanced economies. There are signs that the recovery is firming up in the United States, advancing the prospects of interest rate lift off. This could pose a risk for emerging economies, including Indonesia, in the form of weaker capital flows, higher interest rates, and financial volatility," Lagarde stated.

The changed outlook by IMF follows a sharp sell-off in China's stock market amid waning confidence about the country's economic outlook.

The IMF managing director sought to play down fears that China's authorities are out of policy moves to shore up their slowing economy while warning emerging economies like Indonesia to "be vigilant for spillovers" from China's slowdown.

"As the Chinese economy is adjusting to a new growth model, growth is slowingbut not sharply, and not unexpectedly. The transition to a more market-based economy and the unwinding of risks built up in recent years is complex and could well be somewhat bumpy. That said, the authorities have the policy tools and financial buffers to manage this transition," Lagarde stated.

Fears of a slowing Chinese economy impacting neighbouring countries have led to a sharp weakening of their currencies. Lagarde sought to reassure Indonesia, Southeast Asia's largest economy, that it had the "right tools to actually react" to the global volatility.

"You have very sound public finances with overall government debt in the range of twentyish percent relative to GDP, you have a relatively small deficit," she said, ahead of her meeting with Indonesian President Joko Widodo.