IMF sees global economy gaining, US growth slowing

WASHINGTON — The global economy will likely strengthen the rest of this year and in 2011 as China and other emerging powers offset weakness in the US and Europe. That’s the latest outlook of the International Monetary Fund, which predicts the world economy will expand 4.8 percent this year and 4.2 percent next year. That would far surpass last year’s 0.6-percent decline, the worst since World War II. The IMF’s forecast for worldwide growth this year is 0.2 percentage point more than its previous estimate in July. The international lending agency predicts the US economy will grow 2.6 percent this year, below its previous estimate of 3.3 percent, and 2.3 percent next year. The IMF’s forecast, released Wednesday, points to lingering weakness in the US and Europe after the worst recession since the 1930s Great Depression. The agency says the global economy will require a balancing act: Countries with huge trade and budget deficits such as the US will need to boost exports. And countries with big trade surpluses such as China must reduce their dependency on exports and boost domestic demand. The forecast was prepared for the annual autumn meetings of the 187-nation IMF and its sister lending organization, the World Bank. Finance officials from the Group of 20, representing the world’s richest nations and fast-growing developing countries, are scheduled to hold talks Friday. Obama administration officials said they planned to press other G-20 countries such as China to honor commitments they’ve made to reduce their huge trade surpluses, which come at the expense of other countries. Such trade imbalances contributed to the global downturn. The prediction of 2.6-percent growth for the United States this year is historically weak coming after a recession. But it marks a sharp reversal from the 2.6-percent decline in US activity last year. That was the steepest drop since 1946. The U.S. forecast is down from a 3.3-percent projection the IMF made in July. But the US economy slowed sharply in late spring and summer this year as the European debt crisis shook the confidence of investors and businesses. The IMF’s forecast of 2.3 percent US growth for 2011 is down from its 3 percent estimate in July. Growth prospects are even weaker in Europe. The 16 nations that use the common euro currency will see their economies average 1.7 percent growth this year and 1.5 percent next year, the IMF says. Still, both those forecasts are upgrades from July, following a debt crisis that began in Greece and had threatened to widen throughout Europe. Growth in Japan is projected to be 2.8 percent in 2010 and 1.5 percent in 2011. Its 2011 estimate was trimmed because Japan is still struggling to emerge from nearly two decades of anemic growth. Combined, advanced economies such as the US and Europe are forecast to grow 2.7 percent this year and 2.2 percent next year. By contrast, emerging and developing economies such as those in China, Russia, Eastern Europe and Latin America, are expected to expand 7.1 percent this year and 6.4 percent in 2011 — more than double the growth rates of the advanced economies. —AP