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IMF: World growth to hit 2.5% in 2010
(Agencies)
Updated: 2009-07-09 08:27 Below-trend growth ahead The IMF said while the world's advanced economies are expected to recover modestly next year, growth will remain below potential until later in 2010, suggesting unemployment will rise further. It said the US economy will contract 2.6 percent this year, slightly less than it thought in April, with growth resuming in 2010, albeit at a mere 0.8 percent. The IMF said the euro-area economy would likely shrink 4.8 percent in 2009, 0.6 percentage point more than it had forecast in April. Next year, the IMF said the euro-area would contract 0.3 percent. Japan's economy is expected to contract by 6 percent this year, with growth resuming slightly to around 1.7 percent next year. Emerging and developing countries are likely to regain growth momentum during the second half of 2009, it said. For forecasts, Blanchard said Asia cannot decouple from the global economy despite signs the region is emerging from the worldwide slump faster than many economists had expected.
"After a tough first quarter, Asia, in particular, is now set for a stronger performance than we anticpated earlier," Blanchard said. The IMF revised up forecasts for Asia by nearly 1 percent for both 2009 and 2010. Overall, the IMF said policies should remain supportive until growth resumes and deflationary risks dissipate. Where there is room, central banks should explore cutting interest rates further and signal that they intend to keep them low until a durable recovery is under way, it said.
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