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 Tuesday.
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.....