Open

Coming up

Don't miss

Replay


LATEST SHOWS

#THE 51%

Breaking stereotypes

Read more

#TECH 24

Galaxy S5 v. HTC One (M8): Which is the right one for you?

Read more

FRANCE IN FOCUS

New PM Manuel Valls outlines priorities

Read more

FASHION

Jean-Marc Loubier, bags and shoes.

Read more

ENCORE!

Hip-hop musician Beat Assailant on mixing the sounds of the city

Read more

REVISITED

In Prijedor, survivors fight to keep memory alive

Read more

FOCUS

Bosnia: Hopes of change among disempowered citizens

Read more

IN THE PAPERS

¡Gracias, Gabo!

Read more

IN THE PAPERS

The Socialist rebellion grows

Read more

  • Algeria's ailing Bouteflika clinches fourth term amid fraud claims

    Read more

  • Ukraine separatists say ‘not bound’ by Geneva deal

    Read more

  • Abel Ferrara’s hotly awaited DSK film to premiere on web

    Read more

  • World honours Garcia Marquez’s magical literary legacy

    Read more

  • Analysis Ukraine: ‘One bloody incident could scupper Geneva deal’

    Read more

  • Top Hollande adviser resigns over conflict of interest accusation

    Read more

  • Police seek arrest warrant for South Korea ferry captain

    Read more

  • Indian election: Votes for sale

    Read more

  • West African Ebola outbreak caused by new strain of virus

    Read more

  • Astronomers discover Earth-like planet that could support life

    Read more

  • Video: Tensions remain high in Mariupol despite Geneva deal

    Read more

  • In Prijedor, survivors fight to keep memory alive

    Read more

  • Deadly avalanche strikes Everest in worst-ever disaster

    Read more

  • With a strong French presence, veterans and fresh faces, Cannes aims to please

    Read more

  • Russia and West agree on steps to ease Ukraine crisis

    Read more

  • Mob launches deadly attack on UN shelter for S. Sudan civilians

    Read more

  • Eurostar train mishap causes 'severe' delays

    Read more

  • Chelsea Clinton announces she's pregnant

    Read more

  • French troops free five aid workers kidnapped in Mali by Islamists

    Read more

  • In pictures: Iranian woman pardons son’s killer at the gallows

    Read more

  • After cup defeat, Spanish pundits read last rites for Barcelona

    Read more

  • India heads to polls in single largest day of voting

    Read more

  • Ukraine talks open in Geneva as Putin talks tough on TV

    Read more

  • Pro-Russian separatists killed in attack on Black Sea base

    Read more

  • Man executed in Texas for 2002 triple murder

    Read more

Business

IMF cites eurozone debt in lowering 2012 growth forecast

©

Text by News Wires

Latest update : 2012-01-24

The International Monetary Fund lowered its global economic growth forecast for 2012 to 3.3% from the 4% it predicted in September, citing the eurozone debt crisis and steep government budget cuts as danger factors.

AFP - The International Monetary Fund on Tuesday slashed its forecast for world economic growth, warning the weight of the eurozone crisis threatens to capsize the global recovery.

The IMF cautioned that sharper budget cuts by major economies in the face of slower growth could exacerbate the slowdown, and if European leaders fail to get on top of their debt crisis, global economic output could be cut by more than half.

In an update of its September economic forecasts, the IMF cut 2012 projections to 3.3 percent from 4.0 percent, and said the 17-nation eurozone would contract by 0.5 percent this year.

It said global growth could pick up to 3.9 percent in 2013, but only if market panic over eurozone fragility is avoided.

The newest forecasts are "predicated on the assumption that in the euro area, policymakers intensify efforts to address the crisis," the Fund said.

If Europe's leaders do not take strong action soon, nervous markets will press up the costs of borrowing for governments more widely, forcing them to cut spending.

In that case, world output could be cut by another two percentage points, the global crisis lender said.

"The global recovery is threatened by intensifying strains in the euro area and fragilities elsewhere," the IMF said.

"Financial conditions have deteriorated, growth prospects have dimmed, and downside risks have escalated."

The lowered forecast was tied directly to the euro area economy's expected fall into "mild" recession in 2012 on the back of government spending cuts and commercial banks reducing lending.

"Growth in emerging and developing economies is also expected to slow because of the worsening external environment and a weakening of internal demand," it added.

The Fund has been warning for weeks that global growth was weakening due to the European crisis.

On Monday in Berlin, IMF managing director Christine Lagarde pressed European leaders to build a stronger backstop to prevent the problems in the continent's weakest economies -- Greece, Spain and Portugal -- from pulling down others.

"We need a larger firewall," she said. "Without it, countries like Italy and Spain that are fundamentally able to repay their debts could be forced into a solvency crisis by abnormal financing costs."

The Fund warned against overly sharp budget-balancing by those countries that can afford to move slowly to reduce their deficits.

Otherwise, they will just create more drag on the global economy.

"Decreasing debt is a marathon, not a sprint," said Olivier Blanchard, the IMF's chief economist. "Going too fast will kill growth and further derail the recovery."

The recommendation was pointed at Europe's largest economies Germany, France and Britain, all of which it said would continue to grow this year, albeit at a weak pace.

Germany's economy was seen growing 0.3 percent, France's 0.2 percent, and Britain's 0.6 percent.

The United States, the world's largest economy, was projected to grow 1.8 percent in 2012.

The growth downgrades covered the entire world.

Forecast growth in central and eastern Europe was slashed sharply to 4.5 percent due mainly to fallout from the eurozone crisis.

In China, the world's second largest economy, the IMF saw a slower, soft-landing pace of 8.2 percent this year and 8.8 percent in 2013.

But it warned of the risk of credit and real estate bubbles which, if the country undergoes a loss in overall confidence, could have a "very damaging" impact on economic activity.

Among the other major emerging economies, India should grow at 7.0 percent this year and pick up slightly in 2013; Brazil 3.0 percent; Mexico 3.5 percent; and Russia 3.3 percent.
 

Date created : 2012-01-24

  • ECONOMY

    IMF chief calls for 'bold action' to avert recession

    Read more

  • ECONOMY

    IMF urges EU to 'get its act together' on debt

    Read more

Comments

COMMENT(S)