October 13, 2012 · 0 Comments
World economic growth is faltering, the International Monetary Fund said this week, as it forecast that most of the large developed economies would either shrink this year or grow at paltry rates of 2 percent or less. Developing economies will do better, but the forecasts for them are falling as well.
“The world economic recovery continues, but it has weakened further,” the fund’s chief economist, Olivier Blanchard, told a news conference in Tokyo, where the IMF and World Bank were holding their annual meetings. “In advanced economies, growth is now too low to make a substantial dent in unemployment, and in major emerging markets, growth, which had been strong earlier, has also decreased.”
Only Japan and the United States, among the large industrialized countries, are now forecast to grow more than 2 percent this year, and both are pegged to grow just 2.2 percent.
In April, the IMF forecast that global growth would be 3.5 percent in 2012 – the slowest rate in three years – but would rise to 4.1 percent in 2013. Now it forecasts growth of just 3.3 percent this year, and 3.6 percent in 2013.
The British economy, which in April was expected to post modest growth of 0.8 percent this year, now is expected to shrink by 0.4 percent.
Some of the sharpest cuts in the forecasts came in major developing economies; the forecast of Brazil’s growth this year was cut in half to 1.5 percent.
But Blanchard emphasized that “we do not see these developments, be it in China,India, or Brazil, as signs of hard landing in any of these countries.” He added, “Indeed, we see positive policy measures being taken in all three countries, but the numbers suggest that these countries are going to have lower growth for some time, at least lower than some of the very high growth rates that we saw in earlier times.”
Brazil is still seen as likely to experience a rapid rebound in growth, rising to 4 percent in 2013. The fund’s World Economic Outlook praised the country for “targeted fiscal measures aimed at boosting demand in the near term” and for easing its monetary policy.
In general, the report praised central banks in developing countries for their innovative ways of easing monetary policies, like bond purchases. It said that at the moment, fiscal stimulus was likely to have a larger impact than it normally would, although the ability of countries to apply such stimulus was limited by the need to bring deficits under control over the longer term.
Growth rates are forecast to rise in most countries in 2013, but not in the United States, where it is forecast to dip to 2.1 percent, or in Japan, where the rate is expected to fall to 1.2 percent.
By Web Editor