International Monetary Fund revised Monday the global economic growth estimates for 2012 and 2013 and warned that it would review them again if European policymakers do not act swiftly and decisively to end the debt crisis, according to AFP and Reuters. In a revised edition of the semi-annual report World Economic Outlook, IMF currently estimates that world GDP will grow by 3.5% in 2012 (compared to 3.6% as estimated in April) and 3.9 % in 2013 (down from 4.1% as estimated three months ago).
“In the last three months, the global recovery gave new signs of slowing. The most urgent risk to the global economy is that a delayed or inadequate response could escalate the crisis in the euro area”, the IMF estimated in its new report.
In the case of advanced economies, the IMF estimates that they will rise by 1.4% this year and 1.9% in 2013. For the euro area, the IMF maintained its projected 0.3% contraction this year, followed by an increase of 0.7% in 2013 (0.2 percentage points less than expected in April). According to the IMF, the Spanish economy will contract this year and next year.
For the emerging economies, the IMF revised down 0.1 percentage point estimates for both this year, to 5.6%, and next year, up to 5.9%. IMF revised its forecasts for the Chinese economy to advance 8.0% this year (previous estimate was 8.2% in April) and 8.5% in 2013 (from 8.8% as previously estimated ). IMF decided a more important review for India, predicting an increase of 6.1% this year and an advance of 6.5% in 2013, both 0.7% less than expected in April.
IMF praised the measures taken at the EU leaders’ summit in June appreciating them as “steps in the right direction” but urged more fiscal and banking integration. In addition, the IMF called for the establishment of a pan-European deposit guarantee and a mechanism to sort out banks with problems. “The main priority is tackling the crisis in the euro area”‘, underlines the IMF. The Fund also urged the European Central Bank to provide sufficient liquidity to the banks and continue to loosen its monetary policy.
IMF decision is not surprising, since IMF Managing Director, Christine Largarde, already announced earlier this month that the Fund will review the estimates of the global economy for this year.
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