(Yicai Global) Oct. 17 -- The International Monetary Fund has reduced its forecast for worldwide economic growth this year to 3 percent, its lowest prediction since the global financial crisis in 2008.

The IMF reduced the forecast from its July expectation of 3.2 percent due to ongoing trade conflicts that have taken their toll on business confidence and investment, it said in its World Economic Outlook report, published Oct. 15. The latest issue also cut the IMF's forecast for next year's growth to 3.4 percent from 3.5 percent.

Its region-specific changes included reducing the US forecast by 0.2 point to 2.4 percent this year and by the same amount to 2.1 percent in 2020; cutting its Eurozone prediction by 0.1 point to 1.2 percent this year and by 0.2 point to 1.4 percent next year; lowering its China expectations by 0.1 point this year to 6.1 percent and 0.2 point next  year to 5.8 percent.

China's most important policy goal right now is improving sustainability and quality of growth while addressing external uncertainty and slowing global demand, the report said. As well as introducing monetary easing measures, China needs to use fiscal policy to prevent external problems from dragging down the economy and harming confidence, it added, saying any stimulus should focus on fiscal transfers to low-income households rather than large-scale infrastructure spending.

China should also reduce its dependence on debt and widespread implicit guarantees, and enhance macro-management tools, the IMF said.

Chen Yi, a senior researcher at the Bank of Communication's Financial Research Center, told Yicai Global that China's anti-cyclical policy is starting to kick in.

"Credit growth was CNY1.7 trillion (USD238 billion) in September, above expectations, while social financing grew CNY22.7 trillion and the growth rate of M2 rebounded by 0.2 percentage point to 8.4 percent," he said, adding that this showed the central bank's recent measures were taking effect but that further monitoring would be required.

The People's Bank of China will continue to lower the reserve requirement ratio or add liquidity through targeted tools, added Ding Shuang, chief economist at Standard Chartered Greater China. This will keep social financing growth slightly above the nominal gross domestic product expansion rate, he said.

Editor: James Boynton