SAO PAULO: The International Monetary Fund cut its forecast for US economic growth on Friday and warned Washington and debt-ridden European countries that they are "playing with fire" unless they take immediate steps to reduce their budget deficits.
The IMF, in its regular assessment of global economic prospects, said bigger threats to growth had emerged since its previous report in April, citing the eurozone debt crisis and signs of overheating in emerging market economies. The Washington-based global lender forecast that US GDP would grow a tepid 2.5% this year and 2.7% in 2012. In its forecast just two months ago, it had expected 2.8% and 2.9% growth, respectively.
IMF projected the Indian economy will expand by 8.2% in 2011, unchanged from its growth forecast made in April. However, this is much lower than 10.4% growth witnessed in 2010, it said.
Overall, the IMF slightly lowered its 2011 global growth forecast to 4.3%, down from 4.4% in April. Its forecast for 2012 growth remained unchanged at 4.5%. The IMF said it was slightly more optimistic about the euro area's growth prospects this year, but a lack of political leadership in dealing with Europe's debt crisis and thewrangling over budgetin theUnited States could create major financial volatility in coming months.
"You cannot afford to have a world economy where these important decisions are postponed because you're really playing with fire," said Jose Vinals, director of the IMF's monetary and capital markets department. "We have now entered very clearly into a new phase of the (global) crisis, which is, I would say, the political phase of the crisis," he said.
In the US, the political problems include a fight over raising the legal ceiling on the nation's debt. A first-ever US. default would roil markets and Fitch Ratings said even a "technical" default would jeopardize the country's AAA rating. Olivier Blanchard, the fund's chief economist, told reporters that while the risk of a double-dip recession in the US is small, growth is unlikely to be fast enough to quickly bring down the 9.1% US unemployment rate. IMF said the outlook for the US budget deficit this year has improved somewhat due to higher-than-expected revenues.
source-economictimes
Steven
Management trainee-fundamental analyst
DENIP Consultants Pvt Ltd
No comments:
Post a Comment