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IMF: Global Economic Recovery &Lsquo;weakening’

The International Monetary Fund (IMF) has warned again of a weakening global economic recovery despite government efforts to stimulate growth.

BBC NewsBUSINESS

ADVERTISEMENT23 January 2013 Last updated at 11:51 ETby Judith Stein and Biodun Iginla, BBC Financial News Analysts

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Greek striking workers in Athens in December 2012Continued troubles in the eurozone have weighed on global economic growthContinue reading the main storyGlobal Economy

The International Monetary Fund (IMF) has warned again of a weakening global economic recovery despite government efforts to stimulate growth.

The global economy is likely to grow at a slower rate than previously forecast over the next two years, the organisation said in its latest report.

It said it now expected the eurozone to remain in recession in 2013, having previously predicted growth.

The UK’s growth forecasts have also been revised down.

The IMF said continued problems in the eurozone were weighing on the global economy.

“The euro area continues to pose a large downside risk to the global outlook,” the IMF report said.

“In particular, risks of prolonged stagnation in the euro area as a whole will rise if the momentum for reform is not maintained.”

Same challenges

The eurozone’s economy is now forecast to shrink by 0.1% this year. Just three months ago the IMF had forecast 0.2% growth.

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Enormous economic problems remain, and in many parts of the continent [Europe], they are going to get worse before they get better”

image of Stephanie FlandersStephanie FlandersEconomics editor

Earlier there were signs that some confidence had returned to European markets, with Portugal returning to the bond market to borrow money from investors for the first time since seeking a eurozone bailout in 2011.

Its offering of 2bn euros of five-year bonds was four times oversubscribed by investors.

But overall, the IMF now forecasts that the world economy to grow by 3.5% this year and 4.1% in 2014, 0.1 percentage points lower than stated in October’s forecasts.

Most of that growth is predicted to come from developing economies, rather than the developed countries still emerging from recession.

Earlier this month, the World Bank also cut its global growth forecasts blaming the slow recovery of developed nations.

The prospects for the UK’s economy have also worsened in the last three months, the IMF forecasts suggest.

Previously it forecast growth of 1.1% this year and 2.2% next year. That has now been revised down to 1% and 1.9% growth respectively.

The IMF said the challenges facing developed economies remained the same.

“Most advanced economies face two challenges. First, they need steady and sustained fiscal consolidation. Second, financial sector reform must continue to decrease risks in the financial system,” the report said.

“Addressing these challenges will support recovery and reduce downside risks.”

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