The IMF said the global economic slowdown is worsening as it cut its growth forecasts for the second time since April and warned U.S. and European policymakers that failure to fix their economic ills would prolong the slump.
Global growth in advanced economies is too weak to bring down unemployment and what little momentum exists is coming primarily from central banks, the International Monetary Fund said in its World Economic Outlook, released ahead of its twice- yearly meeting, which will be held in Tokyo later this week.
A key issue is whether the global economy is just hitting another bout of turbulence in what was always expected to be a slow and bumpy recovery or whether the current slowdown has a more lasting component, it said.
The answer depends on whether European and U.S. policymakers deal proactively with their major short-term economic challenges.
Ahead of the Tokyo meeting, policymakers have flagged the U.S. fiscal cliff Ė government spending cuts and tax raises due to take affect early in 2013 Ė and resolving the euro area's debt crisis as the top issues facing the global economy. Europe's debt crisis is a clear and present danger, Canadian Finance Minister Jim Flaherty said last week.
The IMF forecast in its latest health check on the world economy that global output in 2012 would grow just 3.3 percent, down from a July estimate of 3.5 percent.
That would make this the slowest year of growth since 2009 when the world was struggling to pull out of the global financial crisis. It predicted only a modest pickup next year to 3.6 percent, below its July estimate of 3.9 percent.
It projected U.S. growth would be a little more than 2 percent this year and next, but forecast a contraction in the euro area this year by 0.4 percent and modest growth in 2013 of 0.2 percent.
Emerging markets are still expected to grow four times as fast as advanced economies, but the IMF took a sharp knife to its estimates for India and Brazil, with the latter now seen growing slower than the United States this year.
It also cut its expectations for China in 2012 and 2013 but warned against being overly pessimistic about the prospects of these economies, which were major engines of growth in the global financial crisis.
Let me be clear. We do not see these developments as signs