Growth in the U.S. and European economies has slowed
perilously close to stall speed, raising the risk of a
double-dip recession, while emerging markets are losing some of
their buoyancy, the International Monetary Fund said
The funds World Economic Outlook, the most
comprehensive forecast of the global economy, painted a sober
backdrop for the annual meetings of the IMF and World Bank in
Washington later this week. The slowdown makes it all the more
urgent for policymakers to take action to support growth, fund
officials said, calling for bolder measures by the European
Union to contain the blocs debt crisis, further
unconventional monetary easing by the Federal Reserve and an
acceleration of efforts by China and other emerging markets
countries to stimulate domestic demand.
The global economy has entered a dangerous new
phase, says Olivier Blanchard, the IMFs chief
economist. Strong policies are needed both to improve the
outlook and reduce risks.
The IMF slashed its growth forecast for the U.S. to 1.5
percent this year and 1.8 percent in 2012, compared with its
previous forecast of 2.5 percent and 2.7 percent, made only
three months ago. Fund economists see the euro area growing by
1.6 percent this year and 1.1 percent next, compared with 2.0
percent and 1.8 percent previously. The fund shaved its growth
forecast for emerging and developing economies by roughly a
quarter point, to 6.4 percent this year and 6.1 percent in
2012. Altogether, the global economy will grow by 4.0 percent
this year and next, the fund projects.
The downgrade represents an official recognition of what
markets have been signaling over the past few months. Most
private-sector economists have been reducing their forecasts in
recent weeks. J.P. Morgan predicts the U.S. will grow by 1.4
percent this year and just 1.2 percent in 2012; it puts global
growth at around 3.5 percent both years.
The global recovery was already slowing earlier this year
but the worsening of the European debt crisis and the
deterioration in the U.S. economy, exacerbated by the political
brinksmanship over the debt ceiling in July and early August,
have dealt significant blows to confidence, fund officials say.
Markets have become more skeptical about the ability
governments to stabilize their public debt, said