Tuesday, January 24, 2012

IMF Downgrades Global Growth Prospects

The IMF has cut its growth forecast, predicting the global recovery to stall and risks to intensify, in its latest World Economic Outlook. The latest forecast calls for Europe slipping into recession and cooling growth in China. The only major economy without a downward revision was the United States, with growth holding at 1.8% in 2012.

The revised forecast calls for World output to grow by 3.3% in 2012, down from its prediction of 3.9% growth in September. The Eurozone is now expected to enter a recession with its GDP shrinking by 0.5% in 2012, before recovering with 0.8% growth in 2013. This forecast is significantly lower than the 1.1% expansion in GDP that the September IMF forecast predicted for 2012.

The IMF noted that Europe remains the “epicenter,” and that should the crisis worsen, “the world could be plunged into another recession.” The IMF noted that, with certain measures, “the worst can definitely be avoided, and the recovery can be put back on track. These measures can be taken, need to be taken, and need to be taken urgently.” These measures were outlined by IMF Managing Director Christine Lagarde in a January 23rd speech in Berlin, where she called for “stronger growth, larger firewalls, and deeper integration.” Specifically Lagarde called for the IMF to increase its lending resources by up to $500 billion.

Read the IMF Report.

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