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IMF sees wider split in growth prospects

The International Monetary Fund has warned of a growing split in the mid-term growth potential of leading nations. For Europe, it expects things to be looking up, while many emerging countries may underperform.

The IMF on Tuesday highlighted an increasing divergence in the growth paths of major economies this year. The Washington-based institution noted in its latest semi-annual World Economic Outlook that it saw no reason to hike its previous global forecasts of 3.5 percent, warning that the economic recovery remained "moderate and uneven."

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IIE's Jacob Kirkegaard on IMF outlook

While the global perspective remained unchanged, the IMF raised growth expectations for all the major economies in the 19-member eurozone, with one of the biggest pickups penciled in for Spain. It warned, though, that Greece's unresolved financing problems could have a major drag-down effect on fellow eurozone nations in the long term.

But a better overall outlook for much of Europe and India would be offset by diminished prospects in key emerging markets such as Russia, Brazil and South Africa, the IMF said.

Call for reforms

The institution pointed to the dangers of continuing geopolitical tensions in Ukraine, the Middle East and elsewhere and the often negative impact of currency fluctuations.

It feared a greater slowdown in China as the world's second-largest economy kept rebalancing

away from large-scale investment toward consumption-driven growth

.

The IMF noted that the plunge in oil prices was not yet generating all the potential benefits of more spending money in consumers' pockets. It suggested that in order to avoid being locked in subdued growth over the medium term, governments needed to be more aggressive in implementing labor market reforms and boosting investment in infrastructure.

Tuesday's forecasts are to form the backdrop to the meeting of the world's top economic policymakers in Washington later this week.

hg/bk (AFP, Reuters)

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