IMF cuts global economic outlook to 2.9%, slowest growth since 2009
(Reuters) – The International Monetary Fund trimmed its forecasts for global output on Tuesday for the sixth time since early last year, saying 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 United States is driving much of the global recovery and U.S. output should pick up further next year – as long as politics do not get in the way, the IMF said, 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 U.S. 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.
“Policymakers have shown their determination to keep the global economy away from the precipice. Aside from new cliff events, a growing worry is a prolonged period of sluggish global growth,” the Fund added.
For 2013, the IMF now expects global output to expand just 2.9 percent, down from its July estimate of 3.1 percent, making it the slowest year of growth since 2009. It predicted a modest pickup next year to 3.6 percent, below its July estimate of 3.8 percent.
Emerging markets still account for much of global growth, and their economies should expand nearly four times as fast this year as advanced economies. But the heady expansions some enjoyed in recent years may be a thing of the past, the IMF said.
China in particular should slow over the medium term as its economy transitions away from investment to consumption drivers. Markets no longer expect the Chinese government to step in with stimulus if growth dips below 7.5 percent, the Fund said.