Western economies strengthening, emerging markets weaker: IMF

08 April 2014 17:18 Source:ICIS News

LONDON (ICIS)--The momentum of economic recovery is gathering pace across the US and EU, but is likely to be slightly weaker in emerging markets and developing economies over the next couple of years, the International Monetary Foundation (IMF) said on Tuesday.

The organisation cut global projected growth over the next two years by 0.1 percentage points, to 3.6% in 2014 and 3.9% in 2015, due to a weaker external financial environment for emerging markets.

Strong growth prospects for the US in 2014 at an above-trend 2.8% this year on the back of favourable monetary conditions and a recovering housing market is likely to buoy a strengthening recovery for the eurozone, which is expected to expand by 1.2% in 2014 and 1.5% in 2015, the IMF added.

A reduction in the pace of fiscal tightening is also expected to support the eurozone’s recovery, IMF added, as well as a rise in net exports to destinations outside the economic bloc.

The country to receive the largest bump in growth forecasts since the IMF’s last outlook report in January this year is the UK. The country’s GDP growth outlook was increased by 0.4 percentage points in 2014 to 2.9% and by 0.3 percentage points for 2015 to 2.5%.

Canada’s growth forecast was also upgraded by 0.1 percentage points for 2014 to 2.3%, while Germany is marked to be the third-highest performing emerging market this year with an estimated GDP expansion of 1.7%.

“The recovery which was starting to take hold in October is becoming not only stronger, but also broader,” said IMF chief economist Olivier Blanchard. “Although we are far short of a full recovery, the normalization of monetary policy — both conventional and unconventional — is now on the agenda,” he added.

Emerging market growth – including central and eastern Europe, developing Asia, Latin America, the Middle East and Africa – is predicted to increase by 0.2 percentage points year on year to 4.9% in 2014 and 5.3% in 2015, a weaker performance than anticipated, the IMF said.

The outlook identifies low inflation and recent geopolitical flare-ups such as the tension in eastern Europe on the back of Russia’s annexation of the Crimea as other risks to the strength of the global economic recovery.

By Tom Brown