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IMF raises 2014 outlook for global and US economies

Tuesday, January 21, 2014 | 1:54 PM    

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WASHINGTON (AP) — The International Monetary Fund is slightly more optimistic about the global and US economies this year than it was three months ago.

In an updated outlook released Tuesday, the global lending organisation forecasts that the world economy will grow 3.7 per cent in 2014 and that the US economy will grow 2.8 per cent. The global forecast is 0.1 percentage point higher and the US forecast 0.2 point higher than the IMF's October forecast.

After a sluggish start, global economic growth picked up in the second half of 2013. As a result, growth amounted to 3 per cent last year. The IMF expects it will be even stronger growth this year.

"The recovery is indeed strengthening, but as we have said many times in the past, much work remains to be done," IMF chief economist Olivier Blanchard said Tuesday during a conference call.

The IMF forecasts that the US economy grew 1.9 per cent last year. And its 2.8 per cent forecast for this year would match US growth in 2012. Part of the anticipated improvement is based on expectations for less drag from higher US taxes and across-the-board spending cuts.

By 2015, the IMF forecast the US economy will grow 3 percent, or 0.4 percentage point lower than its October forecast. The IMF reduced its outlook because a recent budget agreement left in place most of the spending cuts. The IMF had expected most of those cuts to have been eliminated by next year.

The IMF forecasts stronger growth for the countries in Europe using the common euro currency. The region is emerging from recession after a lingering debt crisis.

Economic activity shrank 0.7 per cent in 2012 and 0.4 per cent in 2013. But this year the IMF projects one per cent growth and 1.4 per cent in 2015.

Germany, the biggest economy in Europe, will grow 1.6 per cent this year it projects, up from 0.5 per cent growth in 2013.

China is expected to grow 7.5 per cent in 2014 and 7.3 per cent in 2015. Both 2014 and 2015 projections were slightly higher than the IMF's October forecast, but lower than the 7.7 per cent growth reported for 2013.

The IMF said that growth in China, the world's second-largest economy, had rebounded strongly in the second half of 2013 due to acceleration in investment. But the IMF said the growth will moderate because of actions by the government to slow growth in credit.

For Japan, the IMF forecast growth of 1.7 per cent this year, the same as 2013, but a slowdown to one per cent growth in 2015.

The IMF added that the United States and other major economies should be careful not to pull back prematurely on the economic support being provided by the Federal Reserve and other central banks. That's because unemployment in many countries remains high and inflation is low.

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