IMF cuts global growth forecast

WASHINGTON: The International Monetary Fund on Tuesday forecast slower global growth for 2013 and 2014 and warned against a more protracted recession in Europe.

The latest update of the IMFs World Economic Outlook also projected an economic slowdown in key developing countries such as China and Brazil.

The report noted that reduced demand worldwide contributed to the global slowdown.

The fund now projected that the world economy will grow at 3.1 per cent this year, down from its April projection of 3.3 per cent. In 2014, the world economy will grow at 3.8 per cent, compared with an earlier forecast of 4 per cent.

This is 0.2 per cent lower than the organization's April World Economic Outlook forecast.

The IMF also lowered its forecast for the United States. The fund warned that the euro-zone officials risk reviving financial and economic stress amid a prolonged recession with a halting response to Europe146s crisis.

Without assertive action, the IMF warned that progress made repairing the euro-zone could stall, potentially sending the economy back into a tailspin.

The eurozone is now expected to contract by 0.6 per cent this year, compared to the April forecast for a 0.4 per cent decline.

The IMF said new global risks had emerged since April, including the possibility of a more drawn out slowdown in developing country economies.

Another potential drag on global growth is the possibility that the US will scale back its injections of cash to stimulate the economy in coming months.

The IMF noted that some developing countries were already feeling the effects in the form of falling share prices and depreciating currencies.

The US economy also looks weaker than previously expected, the IMF said, citing tight fiscal and financial conditions. The IMF lowered forecasts for US growth to 1.7 per cent in 2013, down from 1.9 per cent in April, and to 2.7 per cent for 2014 down from 2.9 per cent.

China and Brazil, among the developing countries, saw significant downward revisions. China's 2013 forecast was scaled back to 7.8 per cent compared to 8.1 per cent in April. For 2014, it fell to 7.7 per cent from 8.3 per cent.

Forecast for Brazil was lowered to 2.5 per cent in 2013 from 3 per cent in April and 3.2 per cent for 2014 compared to 4 per cent previously.

The report also underlined difficult political transitions in the Middle East and North Africa for a slower growth in those regions .

The report, however, noted that British and Japanese economies managed to avoid the slowdown. The IMF is now predicting growth in the UK of 0.9 per cent this year, up by 0.3 per cent since its last report in April when it downgraded the country146s prospects.

The IMF advised wealthier countries to restructure their economies and bring debt down to sustainable levels.

Growth in the Asia-Pacific region showed signs of improving as extreme risks emanating from advanced economies receded. Domestic demand remained resilient, support-ed by relatively easy financial conditions and robust labour markets