Tokyo: In its latest World Economic Outlook
unveiled in Tokyo ahead of the IMF-World Bank 2012 Annual Meetings, the IMF
said advanced economies are projected to grow by 1.3 percent this year,
compared with 1.6 percent last year and 3.0 percent in 2010, with public
spending cutbacks and the still-weak financial system weighing on prospects.
The International Monetary Fund (IMF)
presented a gloomier picture of the global economy than a few months ago,
saying prospects have deteriorated further and risks increased.
Overall, the IMF’s forecast for global
growth was marked down to 3.3 percent this year and a still sluggish 3.6
percent in 2013.
Growth in emerging market and developing
economies was marked down compared with forecasts in July and April to 5.3
percent, against 6.2 percent last year. Leading emerging markets such as China,
India, Russia, and Brazil will all see slower growth. Growth in the volume of
world trade is projected to slump to 3.2 percent this year from 5.8 percent
last year and 12.6 percent in 2010.
“Low growth and uncertainty in advanced
economies are affecting emerging market and developing economies through both
trade and financial channels, adding to homegrown weaknesses,” said IMF Chief Economist
Olivier Blanchard.
Annual Meetings in Tokyo
Release of the closely watched forecast
opens a week of intense activity in Tokyo, where more than 10,000 central
bankers, ministers of finance and development, private sector executives,
academics, and journalists are gathered to discuss global economic issues at
the World Bank-IMF annual meetings being held in the Japanese capital. Two
other key economic assessments will be issued, the Global Financial Stability
Report on the state of the financial sector and the Fiscal Monitor, which
examines public finances.
The IMF said that its forecast rested on
two crucial policy assumptions—that European policymakers get the euro area
crisis under control and that policymakers in the United States take action of
tackle the “fiscal cliff” and do not allow automatic tax increases and spending
cuts to take effect. Failure to act on either issue would make growth prospects
far worse.
The forecast said that monetary policy in
advanced economies was expected to remain supportive. Major central banks have
recently launched new programs to buy bonds and keep interest rates low. But
the global financial system remains fragile and efforts in advanced economies
to rein in budgetary spending, while necessary, have slowed a recovery.