IMF slashes global growth forecast for remainder of ’13, ’14

Posted on Oct 9 2013 - 6:15pm by admin

By Veronica Smith ,AFP
October 9, 2013, 12:07 am TWN

WASHINGTON — The International Monetary Fund on Tuesday lowered its growth forecast for the global economy and warned the outlook could get bleaker if the U.S. political standoff over finances drags on.

The global economy is expected to grow 2.9 percent year-over-year in 2013 and 3.6 percent in 2014, the IMF said, revising July estimates down by 0.3 and 0.2 percentage points, respectively.

Four years after the Great Recession ended, “global growth remains in low gear,” the IMF said in its World Economic Outlook report.

Advanced economies, in particular the United States, are showing signs of pick-up, while emerging-market (EM) economies, although still accounting for most global growth, are losing more momentum than previously thought, the IMF said.

“Global growth is still weak, its underlying dynamics are changing, and the risks to the forecast remain to the downside,” the IMF said.

Two risks were a particular worry: the U.S. Federal Reserve’s plan to exit the exceptionally easy-money policy it has pursued to pull away from the brink of depression, and China’s slowing growth.

The Fund said that financial markets were growing convinced that loose U.S. monetary policy was reaching a “turning point” after Fed officials started talking in May about tapering their program of US$ 85 billion a month on asset purchases, known as quantitative easing.

Though the Fed has yet to begin to taper, the mere talk of tapering QE led to an unexpectedly large increase in long-term yields in the United States and many other economies, slowing capital inflows to emerging-market economies, it said.

As for China, it appears increasingly likely that the world’s second-largest economy will grow more slowly over the medium term than in the recent past, a prospect especially affecting the commodity exporters among the emerging and developing economies.

Overall, the IMF left unchanged its gross domestic product (GDP) growth forecasts for the advanced economies, at 1.2 percent in 2013 and 2.0 percent in 2014.


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