IMF cuts world growth forecasts

20th September 2011

The warning comes in the IMF's half yearly World Economic report. The IMF says the two big issues are the Eurozone and the anaemic US recovery.

PA reports in more detail on the UK's prognosis. The IMF says the UK will see GDP grow 1.1% in 2011, compared with the IMF's last World Economic Outlook report in April of 1.7%, and by 1.6% in 2012, compared with 2.3%.

It quotes John Hawksworth, chief economist at PwC, saying: "Downside risks have risen significantly in recent months so it would be wise for both governments and businesses to develop contingency plans in case such as double dip scenario does emerge. These new IMF projections certainly support our recent argument for more quantitative easing in the UK sooner rather than later."

The IMF says that both the UK and Germany should slow deficit reduction plans if their growth rates undershoot current forecasts and borrowing costs remain low.

"If activity were to undershoot current expectations, countries that face historically low yields should also delay some of their planned adjustment (Germany, the United Kingdom)."

Other countries and regions are facing a slowdown as well.

For example, Business Week focuses on the IMF prediction that Chinese economic growth will fall from 9.6 per cent to 9.5 per cent this year. Next year growth has been cut from 9.5 to 9.0 per cent.

It also wants China to move towards market set interest rates and adds that this would "create incentives for financial institutions to better manage their market risks; remove the artificially low cost of capital, which favours investment over consumption; and at the same time strengthen the transmission of monetary policy".

Bloomberg reports on falls in the estimates for growth in sub-Saharan Africa falling to 5.2 per cent this year from 5.5 per cent.

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