By Nick Mann | 18 April 2012
The International Monetary Fund has upgraded its forecasts for worldwide economic growth in 2012 and 2013.
In its latest economic outlook, the fund said the global economy was now expected to grow by 3.5% this year and not 3.3% as it forecast in January 2012, while growth for 2013 is now expected to be 4.1%, and not 4% as it said at the start of the year.
Gross domestic product in the emerging and developing economies is expected to slow from 6.25% in 2011 to 5.75% this year but then speed back up again to 6% in 2013 as a result of stronger foreign demand and ‘easier’ macroeconomic policies.
For the major advanced economies, ‘weak recovery’ is expected over 2012 and 2013 with a relatively strong performance for the US, where 2.1% growth is forecast for 2012 and 2.4% for 2013.
But the IMF expects the eurozone economy to go into a ‘mild’ recession this year as a result of the sovereign debt crisis and a general loss of confidence, the effects of bank deleveraging on the real economy, and the impact of fiscal consolidation responding to market pressures.
‘Because of the problems in Europe, activity will continue to disappoint for the advanced economies as a group, expanding by only about 1.5% in 2012 and 2% in 2013,’ the report said. This would mean ‘sluggish’ job creation, requiring further income support and help with getting the unemployed back into work.
Echoing comments made by IMF director general Christine Legarde last week, the report said improved activity in the US in the second half of 2011 and the eurozone response to the crisis affecting the single currency had reduced the threat of a sharp economic slowdown.
The improvement in growth will be slow and fragile, it said, and there could be a ‘major’ impact on activity worldwide if the economic problems facing the eurozone intensified again.
A sharp increase in oil prices could also threaten the recovery, it said, with a 50% rise potentially lowering global output by 1.25%. ‘The effects on output could be much larger if the tensions were accompanied by significant financial volatility and losses in confidence,’ it added.
Efforts to counter the spread of the eurozone crisis received a boost yesterday as Japan pledged an additional €60bn to the IMF. Legarde said the money was ‘an important step forward in the ongoing international effort to strengthen the adequacy of the global resources available to prevent and fight crises and to promote global economic stability’.
