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IMF UPDATE1

January 21, 2014

WASHINGTON , Jan. 21 -- ( Kyodo ) _ (EDS: ADDING IMF ECONOMIST'S COMMENTS AT 8TH-10TH GRAFS) The International Monetary Fund on Tuesday upgraded its economic outlooks for the world and Japanese economies in 2014 on the back of an overall recovery in advanced economies. In a revision to its biannual World Economic Outlook report, the IMF raised the expected growth rate of the global economy to 3.7 percent in 2014 from 3.6 percent in its earlier projection released in October, compared with 3 percent growth in 2013. "Activity is expected to improve further in 2014-15, largely on account of recovery in the advanced economies," the IMF said. The Washington -based organization said advanced economies as a whole will grow 2.2 percent in 2014, up from the earlier forecast of 2 percent, compared with a 1.3 percent expansion in 2013. On Japan , the IMF said that a temporary fiscal stimulus being pushed by Prime Minister Shinzo Abe's government "should partly offset the drag from the consumption tax increase" to 8 percent from the current 5 percent in April. "As a result, annual growth is expected to remain broadly unchanged at 1.7 percent in 2014" compared with 2013, it said, revising up its October projection by 0.4 percentage point. The IMF forecast, however, that Japanese growth will slow down to 1 percent in 2015 while the growth rates of the world economy and overall advanced economies will rise to 3.9 percent and 2.3 percent, respectively. Olivier Blanchard , chief economist at the IMF, urged Japan to boost consumption and investment to ensure sustainable growth, telling reporters in a teleconference call that the Japanese expansion "has come so far largely from fiscal stimulus and from exports." The IMF said that downside risks remain in its latest economic outlook, citing weak demand in advanced countries and "very low inflation" in them, especially the eurozone. Blanchard mentioned the possibility that low inflation turns into deflation and warned Japan and eurozone economies could potentially face that risk. The IMF also said, "It will be critical to avoid a premature withdrawal of monetary policy accommodation, including in the United States ," where the Federal Reserve said last month it will scale back its stimulus. The U.S. economy will grow 2.8 percent in 2014, up from the earlier projection of 2.6 percent, compared with a 1.9 percent expansion in 2013. For the eurozone, which suffered contractions in 2012 and 2013, the IMF forecast 1 percent growth in 2014. In emerging economies, stronger demand from advanced economies will lift growth but domestic weaknesses remain a concern, the IMF said, projecting unchanged 5.1 percent growth in 2014, compared with a 4.7 percent expansion in 2013. "Portfolio shifts and capital outflows are likely" in emerging economies after the U.S central bank's unwinding of its quantitative-easing asset purchases, it said. The Chinese economy will grow 7.5 percent in 2014, up 0.3 point from the earlier forecast, and the Indian economy will expand 5.4 percent, up 0.2 point from the October projection, according to the IMF.


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Source: Japan Economic Newswire


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