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World — Growth to rise to +4.5% this year says IMF but downside risks have risen sharply

08 July 2010

The International Monetary Fund (IMF) forecasts world growth to rise to +4.5% this year, before falling to 4.25% in 2011, with the world average masking large differences around the globe.

But despite the stronger than expected first half recovery, the IMF warned that uncertainties surrounding sovereign and financial sector risks in parts of the Euro area could spread more widely, posing difficulties for both financial stability and the economic outlook.


Olivier Blanchard, the IMF's Chief Economist, said "while we predict the recovery will continue. It is clear that downside risks have risen sharply."

These world growth rates hide a large difference between and within advanced and emerging and developing economies, with the United States expected to grow at about +3.25% in 2010, the Euro area at +1%, Japan at close to 2.5% and emerging and developing economies averaging about 6.75%.

The overall numbers do not reveal an important difference between the first and the second half of this year. For advanced countries, growth in the first half is forecast to be +3%, while growth in the second half of the year is forecast to be only +2%, reflecting a slowdown in private demand growth, Blanchard pointed out.

Blanchard went on to say "while we remain cautiously optimistic about the pace of recovery, there are clearly dangers ahead. How Europe deals with fiscal and financial problems, how advanced countries proceed with fiscal consolidation, and how emerging market countries rebalance their economies, will determine the outcome."

To read the full World Economic Outlook please click here

 

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