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| The International Monetary Fund (IMF) chief economist Olivier Blanchard attends a press conference at the IMF headquarters in Washington D.C., capital of the United States, Jan. 24, 2012. IMF on Tuesday sharply lowered global economic growth forecast to 3.3 percent in 2012, as the global recovery was threatened by an escalating eurozone debt crisis. (Xinhua/Wang Yiou) |
WASHINGTON, Jan. 24 (Xinhua) -- The international Monetary Fund (IMF) sharply cut its forecasts for global economic growth on Tuesday, warning about multiple challenges as financial stability in danger, growth prospects have dimmed, and downside risks have escalated.
GLOBAL GROWTH DECELERATES
The IMF downgraded its projection for global economic growth this year to 3.3 percent, and marked down its estimate for next year to 3.9 percent. The euro zone economy would contract 0.5 percent this year before returning to meager growth of 0.8 percent in 2013. Growth in developing economies was also expected to moderate due to "the worsening external environment and a weakening of internal demand."
"The global recovery is threatened by intensifying strains in the euro area and fragilities elsewhere." the IMF said in an update of its World Economic Outlook (WEO) report, one of the three staff reports released on Tuesday.
"The epicenter of danger is Europe, but the rest of the world is increasingly affected," Olivier Blanchard, IMF chief economist, said on Tuesday at a news conference in Washington.
IMF Managing Director Christine Lagarde on Monday urged Europe to boost growth and build a larger firewall to insulate the world economy from a possible 1930s-style crisis. She laid out the core elements of a policy path forward and called for collective efforts to avoid bad scenario.
"The most immediate policy challenge is to restore confidence and put an end to the crisis in the euro area by supporting growth, while sustaining adjustment, containing deleveraging, and providing more liquidity and monetary accommodation," according to the updated report.
In other major advanced economies, the key policy requirements were to address medium-term fiscal imbalances and to repair and reform financial systems, while sustaining the recovery. In developing economies, near-term policy should focus on responding to moderating domestic growth and to slowing external demand from advanced economies, cautioned the IMF.
