IMF- The International Monetary Fund added gloom to the already edgy market conditions as it cut its global growth forecasts and now projects a second year of contraction in the euro region as progress in battling Europe’s debt crisis fails to produce an economic recovery. At the same time, the IMF offered hope that 2014 will be considerably better. The IMF also surprisingly titled its report (attached below) as ‘Gradual Upturn’ where it goes ahead & downgrades the current Global Forecast. In it’s update of the World Economic Outlook report, the IMF said today that the world economy will expand 3.5% this year, less than the 3.6% forecast in October. The IMF expects the 17-country Euro area to shrink 0.2% in 2013, instead of growing 0.2% as forecast in October, as Spain leads the contraction and Germany slows. Is Jens Weidmann reading this report? IMF Chief Economist Olivier Blanchard said in a video released with the report. “Something has to happen to start growth,” “Is Europe on the mend? I think the answer is yes and no,” reported Bloomberg. European officials now still face a recession and unemployment at a record 11.8%. The IMF warned that the region still poses a “large” risk to the rest of the world if efforts under way to strengthen its economies and work on a banking union slip. The downgraded forecast for a second year of economic contraction reflects “delays in the transmission of lower sovereign spreads and improved bank liquidity to private sector borrowing conditions,” as uncertainty remains over ending the turmoil that has engulfed nations from Ireland to Cyprus, according to the report.
The IMF expected Eurozone outlook to improve, forecasting a return to 1% growth in 2014. It sees the world economy expanding 4.1% next year, 0.1 percentage point less than in October. In the U.S., “underlying economic conditions remain on track,” the IMF said as it cut its forecast for the world’s largest economy to 2% from 2.1% in 2013 and raised it 0.1 percentage point to 3% next year. The priority is for Congress to avoid too much deficit reduction too soon, reach an agreement between Republicans and Democrats to raise the debt ceiling and craft a plan to reduce debt over the medium term, according to the report. While the forecast for Japan was left unchanged at 1.2% this year amid fiscal and monetary plans to stimulate its economy, the IMF reduced the 2014 prediction by 0.4% to 0.7%. Growth forecast for Germany was cut by 0.3% to 0.6% in 2013 and is seen accelerating to 1.4% next year, from 1.3%. Brazilian growth forecast is cut to 3.5% this year from 4% and to 4% from 4.2% in 2014 whereas India was lowered 0.1% to 5.9% this year and was left unchanged at 6.4% in 2014. But surprisingly enough, the forecast for China remained unchanged & is seen growing 8.2% this year and 8.5% in 2014. Justifying its reports on the Emerging nations, the IMF said, while most developed economies need steady fiscal consolidation, and continued reform of their financial sector, recommendations for developing counterparts vary depending on their circumstances.
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