July 8: The International Monetary Fund upgraded its 2010 global growth forecast on Thursday, citing robust expansion in Asia and renewed US private demand, but warned the euro area’s debt crisis posed a big risk to recovery.
The IMF said the euro zone’s sovereign financing problems and resulting financial market turbulence were significant challenges, especially with the web of financial and trade links connecting Europe to the world. However, a double-dip world recession was highly unlikely. The fund raised its 2010 global output forecast to 4.6 per cent from 4.2 per cent in April’s review of the global economy, but kept its 2011 view unchanged at 4.3 per cent.
The world economy shrank 0.6 per cent in 2009 as a result of the global financial crisis. “What has happened in Europe is likely to slow down the path to recovery relative to what could have happened, but I think the chances of a double dip are very small, as you know we’re forecasting fairly strong growth for the world economy this year,” Mr Olivier Blanchard, the IMF’s chief economist, said at a briefing in Hong Kong for the organisation’s latest World Economic Outlook and Global Financial Stability reports.
The IMF on Thursday cut its 2011 growth forecasts for Britain, Canada, the euro zone, emerging economies and Japan. The euro area’s 2010 GDP was seen expanding one percent, unchanged from April, although the 2011 GDP forecast was trimmed by 0.2 percentage point to 1.3 per cent.
The biggest upward revisions to growth were in developing economies. Brazil’s 2010 growth forecast was raised by 1.6 per cent to 7.1 per cent and its 2011 forecast was lifted by 0.1 per cent point to 4.2 per cent. The IMF also raised its 2010 forecast for China’s growth to 10.5 per cent from 10 per cent.
Mr Blanchard said Beijing’s shift last month to allow more flexibility in the yuan was headed in the “right direction.”
He said the IMF was working with China to bring more clarity on bank lending to local governments.