IMFSurvey Magazine: In the News
WORLD FORECAST
Global Growth Hits Soft Patch, Expected to Rebound
IMF Survey online
June 17, 2011
IMF sees 2011 global growth broadly unchanged at 4.3 percent, 4.5 percent next year
But weakness in U.S. and Japan, problems in euro area pose greater risks
Strong policy adjustments needed to steer away from unbalanced growth
The global economy, hit by slowdowns in Japan and the United States, is expected to reaccelerate in the second half of the year, but growth remains unbalanced and concerted policy action by major economies is needed to avoid lurking dangers, the IMF says in its latest forecast.
Although the IMF kept its forecast for global growth broadly unchanged at 4.3 percent for this year, rising to 4.5 percent in 2012, the 187-member institution said the mild slowdown in the second quarter of 2011 “is not reassuring.”
While growth in most emerging and developing economies continues to be strong, slowdowns caused by the devastating earthquake and tsunami in Japan, weaker than expected activity in the United States, and shocks to oil supply weighed on the global expansion in the second quarter of the year, the IMF said in an update to its World Economic Outlook (WEO), released in São Paulo, Brazil.
The IMF also released updates to the Global Financial Stability Report (GFSR), which assesses trends in capital markets and the global financial system, and the Fiscal Monitor, which tracks changes in public finance and debt.
“A bump in the road”
Growth in the euro area, powered by more upbeat investment in Germany and France, has been better than expected, but concerns about the depth of fiscal challenges in some European countries have triggered renewed financial volatility.
Speaking about the U.S. slowdown, Olivier Blanchard, the Fund’s Economic Counsellor, said he saw it more as “a bump in the road rather than something more worrisome,” although the U.S. recovery remained weak.
The IMF identified the following regional trends (see table):
• Asia: Growth in emerging Asia will decelerate only slightly from the very high levels of last year. Disruptions to regional production networks due to supply constraints from Japan appear contained, although some sectors, especially automobiles and electronics, could experience strains through the summer.
• Latin America will be bolstered by commodity exports and domestic demand, but the pace of growth will ease in some economies where policies have been tightening more aggressively to reduce risks of overheating.
• Europe: Growth in Europe’s emerging economies is now projected to be higher than previously expected in 2011, followed by a softening in 2012, driven in part by a sharp domestic demand cycle in Turkey.
• Sub-Saharan Africa: Activity is projected to continue strengthening, with domestic demand remaining robust, and commodity exporters benefiting from elevated prices.
• Middle East and North Africa: economic prospects remain clouded by political and social unrest, although the outlook has improved for some oil and mineral exporters.rly in Asia, demand rebalancing—through exchange rate appreciation and structural reforms—remains a top priority for securing balanced growth and employment gains in the medium term.
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http://www.imf.org/external/pubs/ft/survey/so/2011/new061711a.htm