(25 January 2013 – Global) The International Monetary Fund (IMF) predicts the global economy will grow slightly less in 2013 than expected, held back largely by a weak recession-struck Eurozone.’Downside risks remain significant, including prolonged stagnation in the euro area and excessive short-term fiscal tightening in the United States,’ the IMF said, on Wednesday in an economic outlook update.
The IMF projected global gross domestic product (GDP) annual growth of 3.5 percent this year, a dip of 0.1 point from its October forecast, and 4.1 percent in 2014.
Despite some progress in the Eurozone’s efforts to fight the public debt crisis, including a strengthened European Union-wide policy response, ‘the return to recovery after a protracted contraction is delayed,’ it said.
The IMF said the 17-nation economy now was expected to contract by 0.2 percent this year instead of growing by 0.2 percent.
For the United States, the IMF stressed it was the importance of avoiding ‘excessive’ fiscal tightening in the short term so as not to snuff out flickering growth in the world’s largest economy, forecast at 2.0 percent this year.
For Japan, the priority is to undertake structural reforms and wield a ‘more ambitious monetary policy easing’ to boost growth and inflation.
Emerging market and developing countries again will grease the global economy’s engine in 2013, growing a combined 5.5 percent, the IMF forecast.
China’s GDP is expected to grow 8.2 percent, followed by India at 5.9 percent and a 3.5 percent rate in Brazil and Mexico. Sub-Saharan Africa was expected to see 5.8 percent GDP growth.
‘But weakness in advanced economies will weigh on external demand,’ the IMF warned the developing world.