Tuesday, 20 September 2011

IMF warns global economy in danger zone

IMF warns global economy in danger zone

September 21, 2011, 9:10 am By AFP Yahoo!7
The global economy has entered a dangerous new phase, the IMF claims.

The global economy has entered "a dangerous new phase," with a recovery that is much weaker than was predicted just months ago, the International Monetary Fund warned Tuesday.
Cautioning that Western economies could very well fall back into recession - with serious knock-on effects for the rest of the globe - the IMF cut its growth forecasts for the global economy to 4.0 percent for 2011 and 2012.
"The global economy has entered a dangerous new phase. The recovery has weakened considerably, and downside risks have increased sharply," the IMF's chief economist, Olivier Blanchard, said at a news conference.
"Strong policies are needed both to improve the outlook and to reduce the risks." (For related reading, see Great Depression Coming…Not!)
In its twice-yearly World Economic Outlook report, the IMF predicted growth would be patchy across the developed and developing world.
The global economy, which rebounded in 2010 following the 2008-2009 Great Recession, has been dragged down by persistent debt and deficit problems in advanced economies, particularly the United States and the eurozone, it said.
Emerging market economies that have been the recovery's driving force, such as China and India, will not escape unscathed from the weakness in the advanced economies, the Washington-based lender said. (For related reading, see Essential Steps To Stay Afloat)
"Many emerging economies need to make faster progress in strengthening fiscal fundamentals before cyclical factors or spillovers from advanced economies... turn against them," it said in an accompanying analysis.
"Anemic" consumption in advanced economies and spiking financial volatility over worries about US and eurozone public debt have put the brakes on growth, originally forecast a half percentage point higher for this year.
The slowdown in advanced economies was "a development we largely failed to perceive as it was happening," Blanchard acknowledged. (For related reading, see Rate Cut Tipped For November)
Fiscal and financial uncertainty gathered steam in August, roiling financial markets as investors watched political gridlock in Washington over US debt and deficits and the spreading Greek debt crisis in the eurozone.
"Markets have clearly become more skeptical about the ability of many countries to stabilize their public debt," Blanchard said.
The United States, the world's largest economy, suffered the most notable downgrade - about a percentage point - with gross domestic product growth estimated at 1.5 percent this year and 1.8 percent in 2012. (For related reading, see Market Volatility: What Now For Australia?)
For the 17-nation eurozone, GDP growth was projected to slow by about a half point, to 1.1 percent in 2012.
Japan's economy is rebounding from the March earthquake-tsunami disaster, the IMF said, and is expected to contract 0.5 percent this year, less than previously estimated, before clocking in 2.3 percent growth in 2012.
For emerging and developing economies, the IMF said that capacity constraints, policy tightening and slowing foreign demand would result in slightly slower growth of 6.1 percent in 2012. (For related reading, see Businesses And Investors Urged To Prepare For Crash)
China will continue to lead with a 9.0 percent expansion next year.
Growth downgrades were nearly universal, from Russia, Latin America and Sub-Saharan Africa to the Middle East and North Africa.
The IMF warned that a negative feedback loop between low growth and fiscal and financial stability is at the heart of risks facing the world economy.
Worries about sovereign debt have proliferated as growth weakens and extended to the banks holding those government bonds, mainly in Europe. (For related reading, see Why The RBA Needs To Cut Rates)
"Policy indecision has exacerbated uncertainty and added to financial strains, feeding back into the real economy," the IMF warned.
The IMF cautioned that its growth projections "assume that policymakers keep their commitments and the financial turmoil does not run beyond their control, allowing confidence to return as conditions stabilize."
If they fail to do that, "the major advanced economies could fall back into recession." (For related reading, see Cash In On The Volatile Market)
"Vulnerable sovereigns are prone to a sudden loss of investor confidence in their debt sustainability if fundamentals deteriorate sharply."
A separate IMF report showed that the budget woes of Greece, at the heart of Europe's problems, had risen.
The IMF revised up its projection of Greek debt to 189 percent of GDP in 2012. (For related reading, see Great Depression Coming…Not!)

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31 Comments

  1. Mick D09:22am Wednesday 21st September 2011 ESTReport AbuseI SAW THE WHOLE THING OFFICER!....Julia did it! It's all her fault...an...an...and...Wayne helped her! HONEST! Cross my heart and hope to die!
    Reply
  2. chanita09:26am Wednesday 21st September 2011 ESTReport AbuseYahoo has a new trick...it refreshes the comments section every hour...Go Yahoo!
    3 Replies
  3. Pheonix09:27am Wednesday 21st September 2011 ESTReport AbuseThat is because governments everywhere stole the peoples money and gave it to the banks, who caused the meltdown in the first place, to bail them out. The banks have not learned of course and are still doing the same things so of course they are still on the road to disaster. Let's hope the politicians aren't so stupid the second time around. Abig big ask of course.
    Reply
  4. Pheonix09:31am Wednesday 21st September 2011 ESTReport AbuseAustralia gives OUR money to the IMF to lend to third world countries who can't afford to pay anything back. If they could afford to pay they would not be third world countries. So with all of that money dissappearing they wonder why the economies of the contributing countries are in trouble. Get rid of the world bank and the IMF and the economies would fix themselves. Our tax bill would even reduce.
    4 Replies
  5. Mangsaab09:31am Wednesday 21st September 2011 ESTReport AbuseThe Earth is full. 7 billion tipped by April 2012, so why are we growing the economy? Hasn't anybody heard of the exponential function? Maybe the IMF knows something that the punters don't seem to be able to grasp. That when economic growth hits finite resources ........
    Reply
  6. Lord Ian of Glencoe09:34am Wednesday 21st September 2011 ESTReport AbuseComment hidden due to its low rating. Show
    6 Replies
  7. Ravi09:35am Wednesday 21st September 2011 ESTReport AbuseIts time that this dirty rotten Captalism man made system crashes, so mankind can be free from its tentacles. A time of big change is coming and Earth WILL transcend into higher vivration. There will be no place for Greed, Lust, Lies, Tryanny, Dictatorship and hypocrasy as we see currently everywhere. The current world Leaders are all cockroaches that needs to be eliminated before a peaceful civilization can be established, and Nature will make it happen!! NWO dreams are bound to be shattered...
    6 Replies
  8. Daniel09:35am Wednesday 21st September 2011 ESTReport AbuseThe banks deceive us but they are only deceiving themselves... More riots will come and after there is an impending WAR they created... A global war is coming....
    Reply
  9. Simon09:37am Wednesday 21st September 2011 ESTReport AbuseThe money masters are at it again. I somehow feel that someone is deliberately pulling the wool over the business world's eyes.
    Reply
  10. Mick D09:39am Wednesday 21st September 2011 ESTReport AbuseFACT!: There is ENOUGH FOOD, ENERGY, SHELTER & LOVE FOR EVERY SINGLE MAN, WOMAN & CHILD ON EARTH! There is enough food stored in warehouses all over the world(waiting to be traded at the 'right' price)to FEED EVERYONE! ....Capitalism is about to fly up its own aszhole!
    5 Replies
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