GDP growth in 2011 to be slower than thought, says IMF


BBC News | 6 October 2010 | 15:16 GMT

The global economy will grow slightly more slowly than previously expected next year, the International Monetary Fund (IMF) has said. It predicted GDP would increase by 4.2% in 2011, down from an earlier forecast of 4.3%. And while economic recovery was likely to continue, it warned that risks were high. There are worries, as governments try to reduce their debt burdens and cut spending, growth may suffer.

Income gaps On Tuesday, the IMF said that the global financial system remained the weak link in the economic recovery. It predicted a gradual improvement in the financial system, but added that there was a substantial risk of further problems.

‘Vulnerable’

The latest report, the IMF’s World Economic Outlook, highlighted the difference in growth expected in the advanced and emerging economies. In advanced economies – including the US, the UK, Japan and key EU nations – it said that the financial sector was "still vulnerable to shocks,” adding that "growth appears to be slowing" as government stimulus efforts began to be withdrawn.

This would lead to growth of 2.8% in 2010 and 2.2% next year – from an earlier prediction of 2.4%. However, economic growth in what it classes as emerging and developing economies – which include Brazil, Russia, India and China – will be 6.4% next year, it said, unchanged from earlier predictions. This year it is expecting growth of 7.1%, slightly better than previously stated.

Unemployment issue

The IMF forecast was prepared for the annual autumn meeting it holds with the World Bank. It said that while its prediction of 2.6% growth for the US in 2010 was historically weak in the aftermath of a recession, it was a vast improvement on the 2.6% decline in US economic activity in 2009.

And it said growth prospects were weaker in Europe – with the 16 nations in the Eurozone set to see their economies average 1.7% growth this year and 1.5% in 2011. The report also suggested that there were more than 210 million people across the globe who are unemployed – an increase of more than 30 million since 2007.

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One comment

  1. Emerging economies growth

    It has been indeed great last 5-7 years for emerging economies. They have been challenging developed economies very efficiently. Specially China and India are at their best in terms of overall GDP growth. There are still concerning credit issues in these two countries but in the next few years, when the recovery is at its peak, these two countries will be reap the rewards.

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