Loading...
See More

IMF: Global growth forecasts cut

Jul 16 2012 16:11 AFP

Related Articles

Minister: IMF loan gives SA influence

IMF cuts US growth forecast

Stocks rise on monetary stimulus hopes

SA commits $2bn to IMF rescue fund

Brics agree to boost IMF war chest

 

Washington - The International Monetary Fund (IMF) stepped up its warnings on Monday on risks to the global economy, especially coming from Europe, as it trimmed its growth forecast for the rest of the year.

The IMF said the world economy appeared weaker since its assessment just three months ago, and while growth was only slightly off the expected pace, "downside risks continue to loom large," especially from inadequate or slow policy reactions in major economies.

"In the past three months, the global recovery, which was not strong to start with, has shown signs of further weakness," the fund said in its quarterly revision of economic forecasts.

"Financial market and sovereign stress in the euro-area periphery have ratcheted up," it said, while growth has fallen below expectations in a number of major emerging-market economies.

It pointed to renewed deterioration in the markets for European sovereign debt as a sign that eurozone leaders need to move fast on pledged reforms.

The IMF also singled out the overhanging risk from US political stasis that could send the country over a "fiscal cliff" due to laws that, if not changed, will force massive government spending cuts coupled with automatic tax hikes on January 1 that would severely crunch the world's largest economy.

"Avoiding the fiscal cliff, promptly raising the debt ceiling, and developing a medium-term fiscal plan are of the essence," the global crisis lender said in recommendations for the United States.

After forecasting in April that the global economy would expand by 3.5% this year, the IMF said it had cut 0.1% off the forecast, but that the number remained at 3.5% because of rounding.

For 2013, the forecast is 3.9%, down from 4.1%.

The change in the worldwide outlook mainly came from sharp cuts to growth forecasts for the large emerging economies like China, India, Brazil and newly industrialized Asia.

But in addition the IMF saw slower-than-expected growth in the United States, Britain and France, among the major industrialized nations. The US forecast dropped 0.1% to 2% ; France was down 0.1% to 0.3%; and Britain was projected to grow at just 0.2%, compared with 0.8% forecast three months ago.

The bank also said Spain's recession would persist through 2013, after having forecast in April that the country's economy would return to growth next year.

On the bright side, forecasts for this year for Germany and Japan were revised higher -- to 1% and 2.4%, respectively, though the 2013 prediction for each was also trimmed slightly.

Also getting an upgrade was the Middle East and North Africa region, much of which has been struggling through deep political turmoil in the past two years. The IMF said the region would grow about 5.5% this year, much better than the 4.2% predicted in April.

The IMF said that major economies were making progress on cutting their fiscal deficit burdens, but that doing so remained hampered by more volatility and risk aversion in debt markets, which have sent the borrowing costs of the troubled eurozone periphery countries skyrocketing.

The global lender reiterated its prescriptions of recent months: short-term fiscal balance targets for troubled economies like Spain and Italy can be de-emphasized to allow for growth while more focus is placed on medium-term adjustments and reforms.

"A steady pace of adjustment focused on the measures to be implemented rather than on headline deficit targets is preferable, especially in light of heightened downside risks to the outlook."

Moreover, the IMF suggested, the political stress of too much austerity, set to meet fiscal targets, could backfire in countries with IMF or IMF-linked bailout programs, like Ireland, Portugal and Spain.

"The recent deterioration in the political and economic climate in Greece serves as a warning about the potential onset of 'adjustment fatigue,' which remains a threat to continued program implementation."

*Follow the latest news on the global economy from your social networks feed. Join Fin24's Twitter, Facebook and Google+ accounts.

imf  |  global economy
NEXT ON FIN24X

 

Lastest Articles

Here is how to check your credit score and manage it Read More...
Top tips to save money over the festive period Read More...
These are the top 5 most fuel efficient cars in SA Read More...
What to consider when switching medical aid schemes Read More...
 
 

Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
0 comments
Add your comment
Comment 0 characters remaining
 

Company Snapshot

Brought to you by BizNews

More from BizNews

We're talking about:

Small Business

Retailers of any shape and size can now unlock the power of mobile transacting.
 

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...
Loading...