The International Monetary Fund (IMF) upgraded its 2010 global growth forecast on Thursday on the back of robust expansion in Asia and renewed US private demand, but warned the euro area?s debt crisis posed a big risk to recovery.
The IMF said downside risks have risen sharply mostly because of financial market turbulence resulting from Europe?s debt crisis, but a double-dip world recession was highly unlikely.
The IMF raised its 2010 world output forecast to 4.6% from 4.2% in April?s review of the global economy, but kept its 2011 view unchanged at 4.3%.
?The baseline forecast that we have, has nothing like a double-dip,? Olivier Blanchard, the IMF?s chief economist, said at a briefing in Hong Kong for the organisation?s latest World Economic Outlook and Global Financial Stability reports.
Financial stocks have fallen this year on worries about the impact of the euro area?s debt crisis and more lately on concerns that the US recovery is faltering following a string of weak data.
?In this context, the new forecasts hinge on implementation of policies to rebuild confidence and stability, particularly in the euro area,? the IMF said in the reports.
While uncertainty about bank regulation has added to investor concerns, the IMF focused the majority of both reports on the implications of the euro zone sovereign crisis.
In the news briefing, Blanchard said the European bank stress test disclosures due on July 23 were an important step toward transparency but underscored that countries must return to a sustainable level of fiscal spending.
Some 2011 GDP forecasts
Persistent weakness in the US housing and labour markets, euro zone debt problems and a slowdown in growth of manufacturing activity in Asia have made investors speculate the global economy will slow sharply for the rest of the year.
The euro area?s 2010 GDP was seen expanding 1%, unchanged from April, although the 2011 GDP forecast was trimmed by 0.2 percentage point to 1.3%.
The 2010 US GDP growth forecast was raised to 3.3% from 3.1% in April, and the 2011 growth forecast was increased to 2.9% from 2.6%.
The IMF expects 2010 GDP growth of 1.2%, down 0.1 percentage point from a previous forecast, and 2011 GDP to rise 2.1%, down 0.4 percentage point.
Impact on lending
Some countries are facing ?high levels of public debt, unemployment, and in some cases, constrained bank lending.
The IMF predicted growth of 2.6% this year in advanced economies, more than the 2.3% seen in April. The fund cut its 2011 growth forecasts for every G-7 industrial nation except
Asia driver of growth
An inventory-driven rebound in 2010 will fade to more sustainable growth across the region in 2011. However, trade and financial linkages to Europe pose risks for Asia. The IMF said Asian central banks were well equipped to deal with potential market seizures with US dollar swap facilities, and many governments in the region had room to loosen fiscal policy if needed.