International Monetary Fund sees strengthening but worries about uneven global growth and inequality

Now Reading:

International Monetary Fund sees strengthening but worries about uneven global growth and inequality

Text size Aa Aa

The International Monetary Fund has predicted the worldwide recovery will strengthen this year as output in richer nations picks up.

But it warned that recovery is not evenly robust with rising risks in emerging economies.

Global output is set to expand 3.6 percent this year, which is slightly lower than its forecast in January. It was 3.0 percent last year. For 2015 the worldwide forecast is for 3.9 percent expansion.

IMF Chief economist Olivier Blanchard told reporters: “The recovery, which was starting to take hold in October, is becoming not only stronger but also broader. The various breaks, which limited growth, are being slowly loosened.

While less fiscal austerity should help unshackle growth in the United States and Europe, emerging markets are likely to grow more slowly than thought just a few months ago due to tighter financial conditions, the IMF said.

US growth should be 2.8 percent, the eurozone 1.2 percent , China 7.5 percent and Japan 1.4 percent.

Next year it sees slight increases in the US – to 3.0 percent – and the eurozone – 1.5 percent. There are likely to be falls in China – to 7.3 percent and Japan to 1.0 percent.

The Fund sharply raised its forecasts for British growth, to 2.9 percent this year, easing to 2.5 percent next year. That was up from previous forecasts of 2.4 and 2.2 percent.

But for all of its pace since early 2013, Britain’s economy is only expected to get back to its pre-crisis size in the second quarter of this year, significantly lagging other economies such as the United States and Germany.

In its twice-yearly ‘World Economic Outlook’, the IMF said politicians need to come up with more ideas to raise the world’s productive capacity and avoid a prolonged period of sluggish growth.

And there was another concern for the Fund’s economists, according to euronews correspondent Stefan Grobe in Washington: “In its outlook the IMF also point to a potentially dangerous trend that may dominate the scene and that is rising inequality. Until recently, that was not seen a having a major impact on economic development, but this belief is now being called into question, which means that in Europe and in the United States, the debate over minimum wage and economic justice will become tougher.”

It highlighted the eurozone and Japan as being at risk of stagnation without the right policy actions.

Growth in the eurozone is expected for the first time in three years despite the region’s high unemployment, with even Spain’s economy due to expand by 0.9 percent this year.

Among other major eurozone economies the IMF sees French growth reaching 1.0 percent with Germanys economy expected to gain 1.7 percent

The IMF repeated its warnings about the very low level of inflation in the eurozone and called again for stimulus from the European Central Bank.

Deflation is less of an immediate threat to Japan than it has been in the past, the IMF said, largely because a planned increase in the consumption tax will help support prices because the tax will have the effect of raising prices.

But it said the tax hike would likely cut into Japan’s growth and warned of a one in five chance the world’s third-largest economy could slip into recession this year.