IMF Downgrades
Global Economic Forecast
Once again
According to its latest report, between April and July 2012 the IMF sharply revised downwards its growth projections for all categories of countries. For example, it cut the growth prospect for UK to 0.2 percent (down from 0.8 percent) this year and to 1.4 percent (down from2.0 percent) in 2013. It shaved the growth forecast for the crisis-hit euro zone to 0.7 percent in 2013, while maintaining its projection of a 0.3 percent contraction this year.
The IMF chopped its forecast for growth in emerging economies this year and the next: e.g., China 8.0 percent, (down from 8.2 percent forecast in April) and 8.5 percent next year (down from 8.8 percent). It also sharply revised down its growth projections for India to 6.1 percent this year from 6.9 percent, and chopped its 2013 forecast to 6.5 percent from 7.3 percent. Currencies like the Brazilian real and Indian rupee have depreciated by between 15 and 25 percent in less than a quarter, the IMF noted. “In emerging economies, policymakers should be ready to cope with trade declines and the high volatility of capital flows,” it said.
The IMF trimmed its US forecasts slightly but warned of the “fiscal cliff’’ (the scheduled expiration of Bush-era tax cuts and the $1.2 trillion in automatic spending reductions – which can knock the still-weak U.S. economy back into recession) facing the country. And as José Viñals, the head of the fund’s monetary and capital markets department, pointed out, “Uncertainties about the fiscal outlook in the United States present a particular latent risk to global financial stability”. Overall, the IMF cut the 2013 forecast for global economic growth to 3.9 percent from the 4.1 percent it projected in April (to view this in perspective, in 2010 the world economy expanded by 5.3 percent).
