The International Monetary Fund has cut its global growth forecast and warned that the outlook could get worse unless Europe’s policymakers act with more force and speed on the debt crisis.
The IMF’s prediction for this year slipped slightly to three and a ha3.5 percent, but for next year it cut its growth projection to 3.9 percent from April’s four point one percent.
Emerging market economies – such as China, India and Brazil – are not immune with the IMF cautioning growth momentum is slowing.
In the update to its regular World Economic Outlook it says China’s gross domestic product should expand 8.0 percent this year and accelerate to 8.5 growth in 2013.
The IMF cut its growth forecast for the eurozone to 0.7 percent next year and confirmed it expects a 0. 3 percent contraction this year.
It called resolving the eurozone crisis the “utmost priority” and wants European leaders to adopt more fiscal and banking integration as well as a mechanism for failing banks.
UK growth outlook slashed
Britain’s growth prospects for the next two years have worsened more than those of any other big advanced economy over the past three months, the IMF said.
The sharp downgrade chimes with other economists’ darkening assessments, and the IMF said it was too soon to say if a recent flurry of official measures to stimulate growth would be enough, or if the government will have to ease back further on its fiscal austerity plans.
British growth forecasts for 2012 and 2013 were cut by 0.6 percentage points each, to just 0.2 percent and 1.4 percent respectively. That is well below what Britain’s official forecaster, the Office for Budget Responsibility, predicted in March.
The IMF said slower growth would limit the pace at which the UK government could reduce its budget deficit this year and next, predicting the gap would total 7.1 percent of GDP next year, rather than the 6.6 percent it forecast three months ago.