IMF Lowers Forecast for Global Economy Despite ‘Decent’ US Growth

The International Monetary Fund downgraded its forecast slightly for the world economy despite mounting signs that the U.S. is “leaving the financial crisis behind and achieving decent growth.”

Improvements in the recovery from the Great Recession in the U.S. and Britain aren’t enough to offset continued weakness in Europe and lower growth in some emerging markets, the IMF said Tuesday in its updated World Economic Outlook.

“World growth is mediocre and a bit worse than forecast in July,” the group said in the report released at its annual meetings with the World Bank in Washington.

And although ongoing crises in the Middle East and Ukraine haven’t hurt economic growth yet, geopolitical risks remain a threat, the IMF said.

It said the global economy will expand 3.3 percent this year, down 0.1 percentage points from the IMF’s July forecast.

Growth will improve to 3.8 percent next year, it said, but that is 0.2 percentage points less than had been expected this summer.

“The recovery continues, but it is weak and uneven,” said IMF Chief Economist Olivier Blanchard. “Some countries have recovered or nearly recovered, but others are still struggling.”

Despite a weather-related first-quarter contraction, the U.S. economy is forecast to expand 2.2 percent this year. The figure is an improvement of 0.5 percentage points from the July forecast, after the U.S. reported strong second-quarter growth of 4.6 percent.

The nation’s economy should expand 3.1 percent next year, in line with the July forecast, the IMF said.

Blanchard called growth in the U.S. and Britain, whose economy is expected to expand 3.2 percent this year, “decent” and a sign that the nations were moving past the effects of the 2008 financial crisis.

“Even for them, however, potential growth is lower than it was in the early 2000s,” he said.

Europe remains a problem spot.

The economy of the 18-nation Eurozone will grow just 0.8 percent this year, down 0.3 percentage points from the July forecast, the IMF said. Growth estimates for Germany, France and Italy all were downgraded.

Projections for growth in China remain high at 7.4 percent, the same as forecast in July. But other emerging markets in Latin America and Africa are showing weaker growth, the IMF said.

This article appeared in print in the October 8th, 2014 edition of Hamodia.