IMF ups global growth prediction despite looming risks | Business| Economy and finance news from a German perspective | DW | 17.04.2012
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IMF ups global growth prediction despite looming risks

The International Monetary Fund (IMF) sees global economic activity expanding faster than forecast two months ago with China becoming the world's strongest growth engine. Still, big risks remain on the horizon.

The IMF estimates global economic expansion will reach 3.5 percent this year, revising its January forecast of a 3.3 percent increase.

For 2013, the fund expects global growth to come in at 4.1 percent compared with a 4.0 rise estimated in January.

"The outlook for the global economy is slowly improving again, but it is still very fragile," the IMF said in its World Economic Outlook report published twice per year.

The bank attributed the upgrade to improved global financial conditions, notably an easing of tensions in the eurozone debt crisis.

The IMF lauded the European Central Bank for pumping cash into struggling eurozone banks. The fund also praised EU leaders for expanding a financial firewall to contain the debt crisis and for passing recent reforms to restore financial health.

Unbalanced growth

The IMF expects that China will continue to drive global growth, expanding slightly faster than expected at a rate of 8.2 percent this year and 8.8 percent in 2013.

Growth in the United States – the world's largest economy – is now seen at 2.1 percent this year and 2.4 percent in 2013. That marks a rise from previous estimates of 1.8 percent and 2.2 percent, respectively.

However, the fund predicts a contraction for the 17-nation eurozone of 0.3 percent, with only Germany and France seeing respective growth of 0.6 percent and 0.5 percent this year.

Noting that the recession will be "shallow and short-lived," the fund said that the eurozone would start recovering in the second half of 2012.

Looming risks

For 2012, the IMF report sees financial stress remaining volatile and falling "only gradually" in the eurozone.

"If disruptions in the euro area worsen, access to funding is very likely to tighten everywhere," the IMF warned.

The fund added that an oil price shock in the wake of geopolitical tensions over Iran could push up prices by 20 to 30 percent, causing a global slump of a "1930s magnitude."

uhe/srs (AFP, dpa, Reuters)