[131012.EN.BIZ] IMF Sees Slower Global Growth Unless US and Europe Fix Their Economies

THE International Monetary Fund (IMF) is warning of slower growth and a risk of renewed global downturn unless the US and Europe move to repair their economies.

As the eurozone's debt crisis deepens, China's growth estimates were cut by 0.2 percentage points each year to 7.8 per cent in 2012 and 8.2 per cent in 2013, the IMF announced at its Tokyo convention, according to Bloomberg.

"Spain and Italy must follow through with plans that re-establish competitiveness, fiscal balance and maintain growth," said IMF chief economist Olivier Blanchard. "They must recapitalise their banks without adding to their sovereign debt. And they must be able to borrow at reasonable rates."

The IMF expects the US to expand 2.2 per cent this year, higher than an earlier forecast, and growing 2.1 per cent next year, less than previously forecast. Japan's growth estimate was cut to 2.2 per cent this year and to 1.2 per cent in 2013.

Spain's economy will shrink 1.3 per cent next year, 0.7 percentage point worse than predicted in July. German growth is seen at 0.9 per cent each year, with the 2013 estimate half a percentage point less than previously forecast.

The world economy will grow 3.3 per cent this year, the slowest since the 2009 recession, and 3.6 per cent next year, said the IMF' latest World Economic Outlook.

The IMF said the eurozone will contract 0.4 per cent this year, 0.1 percentage point worse than forecast in July and grow 0.2 per cent in 2013, less than the 0.7 per cent predicted three months ago.

Emerging markets are expected to growth more slowly, said the IMF. Brazil's growth rate was cut to 1.5 per cent this year compared to between 2.5 per cent and four per cent predicted earlier for next year.

Only 4.9 per cent growth is expected for India this year and six per cent next year, lower than previous forecasts of 6.2 per cent and 6.6 per cent predicted before.

Separately, Japan reported a larger than expected JYN454.7 billion (US$5.8 billion) current-account surplus. In Australia, business confidence recovered in September as the prospect of interest rate reductions overshadowed weaker sentiment among miners and manufacturers, a private survey showed.

In South Korea, the central bank said that the nation's economy faces increased external risks and the finance ministry said it will step up efforts to boost growth. In Seoul, World Bank president Jim Yong Kim said he saw encouraging signs in Europe.

Source : HKSG, 11.10.12.