By Sandrine Rastello and Timothy R. Homan July 8 (Bloomberg) -- The International Monetary Fund said the global economic rebound next year will be stronger than it forecast in April as the financial system stabilizes and the pace of contractions from the U.S. to Japan moderates.
The Washington-based lender said in a revised forecast<http://www.imf.org/external/pubs/ft/weo/2009/update/02/index.htm>released today that the world economy will expand 2.5 percent in 2010, compared with its April projection of 1.9 percent growth. A contraction this year will be 1.4 percent, worse than an April forecast for a 1.3 percent drop, the IMF said. The improved outlook for next year reflects differing stages of recovery across the globe, with emerging economies including China helping drive the world out of the worst recession in six decades, while Europe lags behind the U.S. and Japan. Still, the fund warned that the pickup is expected to be “sluggish” and called repairing the international banking system a priority. “The global economy is still in a recession but we’re inching towards a recovery,” IMF chief economist Olivier Blanchard<http://search.bloomberg.com/search?q=Olivier%0ABlanchard&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1>said in a statement today. “We have to continue with the fiscal, monetary, financial policies which we have put in place.” At the same time, the fund also called on policy makers to start crafting plans to exit such support measures in order to tame inflation concerns and take steps toward balancing public finances. Advanced economies will continue to lead the slump this year by shrinking 3.8 percent. They will grow 0.6 percent in 2010, more than forecast in April, when the fund expected no growth for next year. U.S. Outlook U.S. gross domestic product will shrink 2.6 percent this year before expanding 0.8 percent in 2010, the IMF said. In April it expected growth to stall next year. The outlook for Japan jumped to 1.7 percent next year from an April estimate of 0.5 percent. This year the fund sees Japan’s economy contracting 6 percent, from an earlier estimate of 6.2 percent, helped by “aggressive fiscal policies” and increased demand from other Asian partners. Emerging and developing economies will grow 4.7 percent next year, a 0.7 percentage point increase from the previous forecasts. This year they will expand 1.5 percent, compared with a 1.6 percent expansion expected in April. China’s growth is forecast to accelerate to 8.5 percent next year, a percentage point more than expected in April, after slowing to 7.5 percent this year. India’s economy will expand by 6.5 percent in 2010, compared with the April forecast of 5.6 percent, after a 5.4 increase percent this year that was higher than the IMF’s prior estimate. Inflation Risk While the fund called risks for sustained deflation “small,” the outlook for global inflation “is expected to remain subdued through 2010, held back by significant excess capacity.” Still, risks to the outlook, which have “diminished noticeably,” are still “tilted to the downside,” the fund said, citing a possible downward pressure on asset prices resulting from rising unemployment, pressure on bond yields from concerns on public debt, and emerging economies’ vulnerability to financial stress. A larger-than-expected drop in risk aversion and stronger demand in emerging economies could offer “some upside risk” that boosts growth, according to the fund. In a separate report today on the state of the global financial system, the IMF said that while financial markets and confidence in an economic recovery have improved since April, risks remain and policy makers must remain vigilant until a sustained recovery is under way. Credit risks are high, bank lending to the private sector is slowing and the recovery so far has been dependent primarily on public funds, the fund said in an update to its Global Financial Stability Report. http://www.bloomberg.com/apps/news?pid=20601087&sid=aHDEXkWnZpA0 -- National Youth Day Dr APJ Abdul Kalam speech http://www.youtube.com/watch?v=k-O24qidjj0&feature=related --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en -~----------~----~----~----~------~----~------~--~---
