The International Monetary Fund (IMF) has downgraded its global growth forecast for 2012 and 2013, noting that
the world's economic recovery had suffered "new setbacks."
The global outlook for 2012 is now 3.3 per cent, down 0.2 percentage points from the international lender's July projection, while its 2013 forecast has been lowered to 3.6 per cent, from the 3.9 per cent it had predicted three months ago.
"The recovery has suffered new setbacks, and uncertainty weighs heavily on the outlook," the IMF said in its semi-annual World Economic Outlook.
The report was released ahead of the IMF's annual meeting with the World Bank, to be held in Tokyo on Friday and Saturday.
"A key reason is that policies in the major advanced economies have not rebuilt confidence in medium-term prospects," the report said.
The slowdown in the global economy has been attributed mainly to the lingering eurozone debt crisis and the so-called fiscal cliff in the United States, the IMF said.
The IMF estimated growth for advanced economies at 1.3 per cent in 2012 and at 1.5 per cent in 2013, both down from 1.4 per cent and 1.8 per cent respectively in its July forecasts.
Advanced economies grew 3 per cent in 2010 and 1.6 per cent in 2011.
"Those forces pulling growth down in advanced economies are fiscal consolidation and a still-weak financial system," IMF chief economist Olivier Blanchard wrote in his forward to the World Economic Outlook.
"In many countries, banks are still weak, and their positions are made worse by low growth. As a result, many borrowers still face tight borrowing conditions," Blanchard said.
Emerging and developing economies are projected to grow at 5.3 per cent for 2012 and 5.6 per cent in 2013, compared to July expectations of 5.6 per cent this year and 5.8 per cent next year.
The numbers for those countries, which are still relatively solid, were down from 7.4 per cent in 2010 and 6.2 per cent in 2011, reflecting weaker external demand due to the problems in the eurozone and other rich countries.
"Low growth and uncertainty in advanced economies are affecting emerging markets and developing economies, through both trade and financial channels, adding to homegrown weaknesses," Blanchard said.
However, central banks in many advanced economies have taken monetary easing measures, which is having a positive impact on financial stability and employment, the report said.
"An effective policy response in the major advanced economies is the key to improving prospects and inspiring more confidence about the future," the IMF said.
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