IMF: high debt and slow growth weakens global economic recovery
The International Monetary Fund (IMF) says global economic prospects have deteriorated whilst risks have increased. Overall forecasts for global growth was marked down to 3.3% this year and a sluggish 3.6% in 2013.
The latest World Economic Outlook by the IMF projects that developed economies will to grow by 1.3% this year, compared with 1.6% last year and 3.0% in 2010.
Unveiled in Tokyo ahead of the IMF-World Bank 2012 Annual Meetings, the forecast says public spending cutbacks and the still-weak financial system is hampering prospects.
Growth in emerging markets and developing economies was also marked down compared with forecasts in July and April to 5.3%, against 6.2% last year. Leading emerging markets such as China, India, Russia, and Brazil (BRIC) will all see slower growth.
Growth in the volume of world trade is projected to slump to 3.2% this year from 5.8% last year, and 12.6% in 2010.
“Low growth and uncertainty in advanced economies are affecting emerging market and developing economies through both trade and financial channels, adding to homegrown weaknesses,” said IMF Chief Economist Olivier Blanchard.
The forecast rested on two crucial issues, firstly the US has to tackle the “fiscal cliff” and not allow automatic tax increases or spending cuts to take effect. Secondly, European policymakers have to get the Eurozone Debt Crisis under control. The IMF stressed failure to act on either would make growth prospects far worse.