ENP Newswire -
Release date- 24072014 - The IMF's latest World Economic Outlook (WEO) Update says that global recovery continues but at an uneven pace, and that downside risks remain.
Continued policy efforts are needed to secure a more robust recovery.
Global growth decelerated more than expected in the first quarter of 2014, largely because of temporary setbacks, including a sharp correction to an earlier inventory buildup and the effects of a harsh winter on domestic demand in
Growth also disappointed in
The WEO Update projects that global growth will rebound as the temporary constraints recede and recent policy actions to support expansion gain ground. For example, in
Global growth is projected to rise from 3.2 percent in 2013 to 3.4 percent in 2014 and 4.0 percent in 2015. The forecast is 0.3 percent weaker for 2014 relative to the
Growth in advanced economies is projected to pick up from 1.3 percent in 2013 to 1.8 percent in 2014 and further to 2.4 percent in 2015.
The outlook for the euro area is broadly unchanged compared to the April WEO, but performance will remain uneven across the region. Continued financial and balance sheet difficulties coupled with high unemployment will result in weaker growth in some economies.
Emerging markets and developing economies
Growth in emerging market and developing economies is expected to decline from 4.7 percent in 2013 to 4.6 percent in 2014 and then accelerate to 5.2 percent in 2015 on stronger exports.
Growth will pick up in 2014-15 in
Ongoing geopolitical tensions took a sharp toll on domestic demand in the first quarter of 2014 in
Downside risks continue to fester, the IMF says. Risks from geopolitical tensions have risen as those related to
Financial market volatility could rise with capital flow reversals and the widening of risk spreads, set off by falling investor appetite or a sharper-than-expected rise in U.S. long-term rates.
Risks also include a prolonged period of subpar growth arising from insufficient demand in advanced economies, or from the effects of adverse financial market conditions on emerging markets. Some economies could also suffer from persistent weaknesses in investment.
Policy support is needed to achieve a more robust recovery with stronger actual and potential growth in many economies.
For major advanced economies, the IMF suggests that the supportive monetary policy stance should continue, with normalization proceeding gradually-at different speeds in different economies-as economic slack diminishes. Fiscal adjustment should maintain a balance between supporting short-term and medium-term growth. Financial regulatory reforms should be completed, and macroprudential tools should be developed and used to limit financial instability risks.
Although priorities differ across emerging market and developing economies, many have limited policy buffers to raise growth if downside risks materialize. The Update recommends that these economies contain external vulnerability, including by allowing the exchange rate to adjust to external financial shocks. Some need to contain fiscal imbalances and inflationary pressures.
Finally, many economies need to implement structural reforms to lift investment and growth.
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