IMF sees rich nations propelling global growth, but risks linger

Tue Apr 8, 2014 1:33pm EDT
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By Anna Yukhananov

WASHINGTON (Reuters) - The International Monetary Fund on Tuesday predicted the global recovery would strengthen this year and next as output in richer nations picked up, but it warned of rising risks in emerging economies.

In its latest global economic snapshot, the Washington-based IMF nevertheless said better policies were needed in both advanced and emerging nations to avoid a prolonged period of sluggish growth.

Global output should expand 3.6 percent this year, slightly lower than forecast in January, and grow 3.9 percent next year, the IMF said in its flagship "World Economic Outlook." That would make 2015 the strongest year of growth in four years.

But the numbers mask an increasing divergence among countries. While less fiscal austerity should help unshackle growth in the United States and Europe, emerging markets are likely to grow more slowly than thought just a few months ago, the IMF said.

Geopolitical risks have also entered the picture because of the conflict between Russia and Western countries over Ukraine.

"The strengthening of the recovery from the Great Recession in the advanced economies is a welcome development," the IMF said. "But growth is not evenly robust across the globe, and more policy efforts are needed to fully restore confidence, ensure robust growth, and lower downside risks."

Despite weather-related weakness at the start of the year, the IMF said the United States should enjoy above-trend growth of 2.8 percent this year thanks to less severe budget cutting, a recovering housing market and an easy monetary policy.

It said it did not expect the U.S. Federal Reserve to raise interest rates until the third quarter of next year.   Continued...

A man counts U.S. dollars at a currency exchange office in central Tripoli March 30, 2014. REUTERS/Ismail Zitouny