IMF cuts growth forecasts for all, bar US
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The International Monetary Fund (IMF) has cut its 2012 growth forecasts for every region apart from the US, warning that recovery has stalled in most countries.
In its World Economic Outlook update, the Washington-based lender predicts that the global economy will grow by just 3.3% over the course of the year, down from the 4% estimate it made in September.
The eurozone is expected to see economic contraction of 0.5% this year, revised from the previous forecast of 1.1%. The UK’s growth has been cut from 1.6% to 0.6%, while Japan’s was revised from 2.3% to 1.7%.
Emerging economies are tipped to grow by 5.4% in 2011, compared with the IMF’s September prediction of 6.1%. China is still expected to demonstrate the strongest expansion, but the forecast has been lowered from 9% to 8.2%.
Only the US has avoided a reduction in its 2012 growth outlook, which the fund maintained at 1.8%.
The IMF says the near-term outlook for the global economy has “noticeably deteriorated” in recent months, with a mild recession now expected in the eurozone. (article continues below)
“The main reason is the escalating euro area crisis, which is interacting with financial fragilities elsewhere,” according to the IMF.
“Specifically, concerns about banking sector losses and fiscal sustainability widened sovereign spreads for many euro area countries, which reached highs not seen since the launch of the economic and monetary union.”
The update predicts that most advanced economies will avoid recession next year. However, their growth will be “sluggish” and not enough to create a significant improvement in employment.
Emerging markets will be hampered by the worsening external environment and a slowdown in domestic demand, with growth moderating from its previously high pace.
The IMF also downgraded its 2013 growth outlook for all countries, including the US, in the update. Next year will see the global economy expand by 3.9%, the fund says, down from its previous 4.5% estimate.
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