IMF cuts 2012 global growth forecast to 3.3% on US, EU concerns

09 October 2012 03:31  [Source: ICIS news]

SINGAPORE (ICIS)--The International Monetary Fund (IMF) on Tuesday cut its 2012 global growth forecast for the second time since April, because of ongoing concerns over the eurozone debt crisis and weak US economy.

The global economy is projected to grow by 3.3% year on year in 2012, down from the July forecast of 3.5%, before rebounding to 3.6% next year, the IMF said in its World Economic Outlook report.

On a year-on-year basis, growth for Asia’s developing economies is expected at 6.7% in 2012, down from IMF’s July prediction of 7.1%. Growth is expected to rebound to 7.2% next year, down from its previous forecast of 7.5%.

The growth forecast for China has been cut to 7.8% in 2012, from a previous estimate of 8%. However, growth is expected to rebound to 8.2% next year, as recent easing measures take into effect, according to IMF.

A return to double-digit growth in China is unlikely, given the policy objectives laid out in the Chinese government’s 12th five-year plan, IMF added.

"A key issue is whether the global economy is just hitting another bout of turbulence in what was always expected to be a slow and bumpy recovery or whether the current slowdown has a more lasting component," IMF said.

"The answer depends on whether European and US policy-makers deal proactively with their major short-term economic challenges," it added.

IMF warned that output is expected to remain sluggish in advanced economies, but is still “relatively solid” in many emerging markets.

Unemployment is likely to stay at high levels in many countries, while global conditions “will remain fragile”, it added.

“The crisis in the euro area remains the most obvious threat to the global outlook,” it said.

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