IMF cuts forecast for global economic growth

PanARMENIAN.Net - The International Monetary Fund (IMF) has cut its forecast for global economic growth for both this year and next and warned the recovery is "weak and uneven". It is now forecasting 3.3% growth this year, down from its forecast in July of 3.4%. Next year, it predicts 3.8% growth, against an earlier prediction of 4.0%, according to BBC News.

The reductions reflect sharp downgrades to the outlook for the eurozone, Russia, the Middle East and Japan.

"This number hides very different evolutions. Some countries have recovered or nearly recovered. But others are still struggling," IMF chief economist Olivier Blanchard said, adding that the pace of recovery was becoming more country specific.

The IMF said activity had "become more balanced", driven by both consumption and business investment. However, the fund said Europe was experiencing a "multispeed recovery" and downgraded its growth forecasts for Germany, France and Italy saying progress was still "slow and tentative" in many countries.

"Growth in the euro area nearly stalled this year, even in the core," said Blanchard.

The IMF has also sharply upgraded its outlook for the U.S. this year, by 0.5% to 2.2%, saying the weakness at the beginning of the year was due to "mostly temporary" factors. The U.S. economy contracted sharply in the first three months of the year, mainly due to unexpectedly bad weather.

Japan received the largest downgrade of any country, with growth for this year now expected to be 0.9%. The IMF said this reflected the bigger-than-expected impact of its decision to raise its sales tax in April to 8% from 5%.

There were also downward revisions for several emerging economies, with the largest being for Russian growth next year, reflecting what the IMF said was "an escalation of geopolitical tensions between Russia and Ukraine".

"Even without further escalation, prolonged uncertainty could erode confidence, accelerate capital outflows, put pressure on the exchange rate, and further weaken investment and growth in Russia," it warned.