IMF cuts forecasts for global growth

Tuesday 08 October 2013 23.20
IMF economist Olivier Blanchard said US default is unlikely
IMF economist Olivier Blanchard said US default is unlikely

The International Monetary Fund has trimmed its forecasts for global output for the sixth time since early last year.

It said stronger growth in most advanced economies would fail to make up for a more sluggish expansion in the developing world.

Prospects for emerging markets, long the engine of the global recovery, have dimmed somewhat with both structural and cyclical factors at play, the IMF said in its latest snapshot on the health of the global economy.

The US is driving much of the global recovery and US output should pick up further next year, as long as politics do not get in the way, the IMF said.

It was referring to a looming standoff over the nation's $16.7 trillion debt ceiling.

"A failure to promptly raise the debt ceiling, leading to a US selective default, could seriously damage the global economy," the IMF warned in its latest World Economic Outlook, released ahead of its twice-yearly meetings later this week.

For 2013, the IMF now expects global output to expand just 2.9%, down from its July estimate of 3.1%, making it the slowest year of growth since 2009.

It predicted a modest pickup next year to 3.6%, below its July estimate of 3.8%.

The IMF noted that in Europe, a better mood, more than any change in policy lifted core economies such as Germany and France, and even Italy and Spain should edge into positive growth territory next year.

But it added that the eurozone must still address financial fragmentation, improve the health of banks and move closer to banking union, as the IMF urged in past reports.