IMF cuts growth global forecast, Euro negative

Jan 25, 2012 (LBO) – The International Monetary Fund cut the forecast for world growth as a series of ‘stimulus’ measures by deficit spending failed, worsening debt, undermining confidence and pushing some nations to into sovereign credit trouble. Emerging economies will grow 5.4 percent in 2012 (down from an earlier forecast of 6.2 percent), with Central and Eastern Europe to slow to 1.1 percent from 5.1 percent and Russia to slow to 3.3 percent from 4.1 percent.

China’s growth is expected to be 8.2 percent (down from a 9.2 percent forecast) and India 7.0 percent from (7.4 percent).

Olivier Blanchard, economic counsellor and director of the research department, said the two countries will slow largely due to internal reasons and not due to external fallout.
Bank credit was still weak.

Sovereign credit risks were worsening in Europe.

“Sovereign financing risk has increased for many countries in the last three months,” José Viñals, financial counsellor and director of the Monetary and Capital Markets Department, IMF said.

The IMF said the Euro area will shrink 0.5 percent in its World Economic Outlook, against a 1.6 percent positive forecast made in September.

Fiscally conservative Germany is expected to grow 0.3