Global economy in danger zone

Friday, January 27, 2012

THE world's economy is "deeply into the danger zone" because of risks from the eurozone, the International Monetary Fund (IMF) has said.

The IMF predicts the global economy will grow by 3.25 per cent in 2012, down from an earlier forecast of 4 per cent.

Latin America and the Caribbean

Latin America and the Caribbean will experience strong economic growth of 4.5 per cent this year and 4.0 per cent in 2012 thanks largely to commodity exports and despite slow global growth, the IMF said in its annual forecast Tuesday.

The International Monetary Fund slightly decreased its 2011 growth forecast for the region — down from the 4.6 per cent predicted in June — but maintains a positive outlook, with variations by countries.

The forecast comes on the day the IMF reported that the global economic recovery is slowing, and projected world growth of 4 per cent in both 2011 and 2012, down from over 5 per cent in 2010.

The UK

The growth forecast for the UK economy has been cut to 0.6 per cent from 1.6 per cent.

But the eurozone is set for a "mild recession" in 2012, with GDP expected to shrink by 0.5 per cent, compared with a previous forecast of 1.1 per cent growth.

UK Shadow chancellor Ed Balls called for the government to rethink its austerity plan in the light of the IMF estimates.

"Last year the IMF was clear that if growth undershot expectations then the British government should reconsider the pace of spending cuts and tax rises which choked off our recovery well before the recent eurozone crisis, pushed up unemployment and has seen borrowing forecasts soar," said Balls.

"Now the IMF has slashed their growth forecasts and confirmed that growth in Britain will indeed be much lower than they expected. And they have called on countries with low interest rates, like the UK, to reconsider the speed of their spending cuts and tax rises."

In response, the government said the IMF predictions matched those made by the independent Office of Budgetary Responsibility, which informs government economic policy.

"The IMF has downgraded its growth forecasts for all the major economies, reflecting the deterioration in the global outlook since their last forecasts in September," said a Treasury spokesperson.