WASHINGTON, July 9, 2013 (AFP) – The International Monetary Fund on Tuesday cut its global economic growth forecast, citing new downside risks in key emerging-market economies and a deeper recession in the eurozone. The IMF projected the world’s economy would grow 3.1 percent in 2013, down from its April estimate of 3.3 percent. China and other emerging economic powers now face new risks, it warned, “including the possibility of a longer growth slowdown.”
The global lender said that growth had been affected by increased financial market volatility and rising interest rates in advanced economies since its last World Economic Outlook report was published in April.
“Emerging-market economies have generally been hit hardest,” the Fund said in its update of the WEO report.
The expected US Federal Reserve’s unwinding of its massive monetary policy stimulus could trigger sustained capital outflows from emerging-markets, the IMF warned.
“Monetary easing can be the first line of defense against downside risks” in emerging-market and developing economies, where inflation was generally expected to moderate, it said.
But fiscal policy options may be limited.
“Real policy rates are low already, and