WASHINGTON — The International Monetary Fund (IMF) has downgraded its world growth outlook, as the commodities slump and political gridlock push Brazil deeper into recession, plunging oil prices hobble capital investment, and the rising greenback curbs prospects in the United States.

The global economy will expand 3.4 per cent this year, the Washington-based IMF said yesterday in a quarterly update to its World Economic Outlook, down from the 3.6 per cent it had projected in October. It also cut its forecast for growth next year to 3.6 per cent, down from the 3.8 per cent it forecast three months ago.

The IMF’s downgrade offers little solace amid a gloomy start to 2016 for financial markets, when a sell-off in Chinese markets set off an avalanche across global bourses. The plunge in oil prices to 12-year lows and tightening US monetary policy has continued to drive flight from riskier assets around the world.

“This coming year is going to be a year of great challenges and policymakers should be thinking about short-term resilience and the ways they can bolster it, and also about the longer-term growth prospects,” said IMF chief economist Maurice Obstfeld.

The IMF estimates the global economy grew 3.1 per cent last year, the weakest pace since the 2009 global financial crisis, as growth in emerging markets and developing nations slowed for the fifth straight year.

The fund said the world economy is facing three big adjustments: The emerging market slowdown, China’s structural shift to growth driven more by consumer spending and less by exports and manufacturing, and the US Federal Reserve’s gradual exit from ultra-low interest rates. Global growth could be derailed if these challenges are not managed well, warned the IMF.

The downbeat outlook and market turmoil cloud the picture for IMF Managing Director Christine Lagarde and more than 2,500 policymakers, corporate executives, investors and academics heading to Davos, Switzerland, for this week’s annual meeting of the World Economic Forum. Among those attending are European Central Bank President Mario Draghi, Bank of Japan Governor Haruhiko Kuroda and Reserve Bank of India Governor Raghuram Rajan.

“We may be in for a bumpy ride this year, especially in the emerging and developing world,” said Mr Obstfeld.

The IMF marked down its growth forecast for emerging and developing economies to 4.3 per cent this year from a projection of 4.5 per cent in October. It left the estimate for China’s growth this year unchanged at 6.3 per cent, but downgraded the forecast for Brazil by 2.5 percentage points to a contraction of 3.5 per cent. The IMF also expects Russia’s economy to shrink 1 per cent this year, compared with the 0.6 per cent contraction projected in October.

In advanced economies, the IMF expects a “modest and uneven” recovery to continue. It reduced its forecast for US growth this year to 2.6 per cent from 2.8 per cent in October. While the world’s largest economy remains resilient overall, the strong US dollar is weighing on manufacturing, and low oil prices are curtailing capital investment, it said. The IMF raised its projection for euro-area growth this year to 1.7 per cent, up 0.1 percentage point from three months ago.

The fund reiterated its call for monetary policy to remain loose in the advanced economies, with countries ramping up public spending where possible and pushing ahead with structural reforms. BLOOMBERG