IMF predicts weak and bumpy global recovery ahead
Tuesday, 20 September 2011 05:13
The International Monetary Fund (IMF) has warned that the global economy could be thrown back into recession due to the continued debt crisis in the United States and eurozone.
The IMF has predicted that economic growth for developed countries will be very low, 1.5 per cent, in 2011 and has lowered its estimate for global economic growth in 2011 and 2012 to just four per cent, down from its earlier prediction of five per cent.
In its September 2011 World Economic Outlook the IMF said: “The global economy is in a dangerous new phase. Global activity has weakened and become more uneven, confidence has fallen sharply recently, and downside risks are growing.”
The report issues revised growth predictions for economies across the world. The IMF has slashed growth forecast for the 17-country eurozone to 1.6 per cent, down from two per cent forecast in June. It has reduced growth estimates for the UK in 2012 from 2.3 per cent to just 1.6 per cent.
The report predicts that the US will have weak levels of growth for “years to come”. It called for “strong and decisive action to avert a decade of lost growth in the advanced economies.”
The report predicts that only two developed countries, Germany and Canada will experience growth of more than two per cent in 2011. The largest downward revisions are for the US and Italy.
IMF chief economist Olivier Blanchard said: "There is a wide perception that policymakers are one step behind the action. Europe must get its act together.
“Strong policies are urgently needed to improve the outlook and to reduce the risks, he added.”
The picture for emerging and developing countries was brighter, according to the IMF. It predicts overall growth of 6.4 per cent in 2011 and 6.1 per cent in 2012 for this group of countries that includes Russia, China, India and Brazil.
The report highlights concerns over employment levels as the biggest danger to the US economy.
The report said: “The top priorities in the United States include devising a medium-term fiscal consolidation plan to put public debt on a sustainable path and to implement policies to sustain the recovery. The new American Jobs Act would provide needed short-term support to the economy, but it must be flanked with a strong medium-term fiscal plan that raises revenues and contains the growth of entitlement spending.”
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