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Global growth to slow significantly – IMF

Posted by By Agency reporter on 2008/07/21 | Views: 2109 |

Global growth to slow significantly – IMF


The International Monetary Fund expects global growth to slow significantly in the second half of the year, before recovering gradually in 2009.

The International Monetary Fund expects global growth to slow significantly in the second half of the year, before recovering gradually in 2009.

Updated forecasts in the IMF’s World Economic Outlook, released on Thursday, also raise inflation projections, particularly for emerging markets and developing countries.

According to a statement posted on IMF’s website on Friday, the WEO expects a moderation in global growth from five per cent in 2007 to 4.1 per cent in 2008 and 3.9 per cent in 2009. It said following a better-than-expected performance in the early part of 2008, WEO projections for the United States, the euro area, and Japan showed a slowdown in activity in the second half of 2008.

“Expansions in emerging and developing economies are also expected to lose further steam, with growth in these countries projected to ease to around seven per cent in 2008-2009, from eight per cent in 2007. China’s growth rate is expected to ease from near 12 per cent in 2007 to around 10 per cent in 2008-2009.

“The global economy is in a tough spot, caught between sharply slowing demand in many advanced economies and rising inflation everywhere, notably in emerging and developing economies,” the WEO said.

At the same time, as the growth slows down, rising energy and commodity prices have boosted inflationary pressure, particularly in emerging and developing economies, according to WEO.

The IMF said in advanced economies, inflation pressures were likely to be countered by slowing demand and, with commodity prices projected to stabilise, the expected increase in inflation for 2008 “is forecast to be reversed in 2009”.

“In emerging and developing countries, inflationary pressures are mounting faster, fueled by soaring commodity prices, above-trend growth, and accommodative macroeconomic policies. Hence, inflation forecasts for these economies have been raised by more than 1.5 percentage points in both 2008 and 2009, to 9.1 percent and 7.4 per cent, respectively, and the moderation in inflation in 2009 will depend on more assertive tightening of monetary conditions,” it observed.

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