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Global economic recovery weakening, says IMF

Global Recovery


The global economic recovery is weakening as government policies have failed to restore confidence, the International Monetary Fund has said.

It added that the risk of further deterioration in the economic outlook was "considerable" and had increased.

The IMF downgraded its estimate for global growth in 2013 to 3.6% from the 3.9% it forecast in July.

One of the biggest downgrades was to the UK economy, which the IMF expects to shrink by 0.4% this year.

This compares with its forecast of 0.2% growth in July. Next year, the UK economy should grow by 1.1%, the IMF said, down from its previous forecast of 1.4%.

In response to the downgrade, the UK Treasury highlighted the fact that the IMF had "repeated its advice that the first line of defence against [slowing growth] should be to allow the automatic stabilisers to operate, monetary policy easing and measures to ease the flow of credit - all of which the UK is doing".

The fund's forecast for global growth this year has been lowered to 3.3% from 3.5%.

Olivier Blanchard, the IMF's chief economist, said the slowdown was being led by problems within the developed countries: "Low growth in advanced economies is affecting emerging and developing economies through exports."

Jubilee disruption

David Cameron, defended the UK's economic strategy, saying the job would take some time.

"What is happening is a rebalancing of our economy. We have created a million net new jobs [and] we are now a net exporter of cars," he told the BBC.

"But it is a slow process."

The shadow treasury minister, Chris Leslie, said the IMF's downward revision of the UK's economic outlook showed the government's economic policies were not working: "Twelve months ago, the IMF were saying, if the economic situation worsened, we'd need to have an alternative plan, we'd need to have serious action.

"Here we are a year later and, you know, can there be any doubt, can there be any question at all that we've got to have some stimulus to our economy, some action absolutely right now."

The markdown for the UK's prospects comes despite recent data that has pointed to a return to growth.

However, Martin Beck, from Capital Economics, said that was mainly due to a recovery from the effects of the Queen's Jubilee celebrations on the economy.

"Recent data had actually been been quite promising - industrial output and exports increased quite substantially - but that largely reflected the fact that June was a bad month because of the Jubilee disruption and the extra bank holiday we had then," he told the BBC.

"We've got a positive growth rate for the third quarter but we expect another contraction in the fourth quarter."

Greater union

The IMF's report said that overall, "[economic] output is expected to remain sluggish in advanced economies but still relatively solid in many emerging markets and developing economies".

It said much would depend on action taken by policymakers in Europe and the US.

Tags:     International Monetary Fund      IMF      UK