IMF trims 2013 global GDP growth forecast on continued Europe worries

23 January 2013 16:53  [Source: ICIS news]

LONDON (ICIS)--The International Monetary Fund (IMF) on Wednesday reduced its 2013 forecast for global GDP growth to 3.5%, mainly because of an expected contraction in Europe, it said in an update report.

The eurozone could contract by 0.2% in 2013, the IMF said. The IMF cut its growth projection for Germany to 0.6% for 2013, from previously 0.9%.

The IMF said that even though EU policy actions reduced risks and improved financial conditions for governments and banks in Europe’s periphery economies, those actions had not yet translated into improved borrowing conditions for the private sector.

“Continuing uncertainty about the ultimate resolution of the global financial crisis, despite continued progress in policy reforms, could also dampen the region’s prospects,” it added.

The IMF cut its global forecast for 2013 to 3.5%, from previously 3.6%. For 2014, the IMF reduced its forecast to 4.1%, from previously 4.2%. In 2012, global GDP growth was 3.2% and in 2011 it was 3.9%.

The IMF expects the US economy to grow by 2.0% this year, compared with 2.1% in its previous forecast. As for China, the IMF left its previous 2013 growth projection unchanged at 8.2%.

“If crisis risks do not materialise and financial conditions continue to improve, global growth could even be stronger than forecast,” the IMF said.

“But downside risks remain significant, including prolonged stagnation in the eurozone and excessive short-term fiscal tightening in the US,” it added.

The IMF’s report noted that economic conditions improved slightly in the third quarter of 2012, driven by performance in emerging market economies and the US.

Financial conditions also improved, as borrowing costs for countries in the eurozone periphery fell, and many stock markets around the world rose.

But activity in the eurozone periphery was even softer than expected, with some of that weakness spilling over to the eurozone core, it said. Meanwhile, Japan moved into recession in the second half of last year, it added.

Paul Hodges studies key influences shaping the chemical industry in his Chemicals and the Economy Blog

By: Stefan Baumgarten
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