Indian
September 5th, 2001, 02:00 AM
WASHINGTON: With downside risks to the global economy mounting and European growth prospects bleaker than previously thought, IMF economists have cut their global growth forecast for this year to 2.7 per cent from an April estimate of 3.2 per cent, an IMF source said on Tuesday.
That forecast, being prepared for publication in the International Monetary Fund's World Economic Outlook later this month, has been shaved back from a 2.8 per cent growth rate staff economists had expected just last month.
Growth in India is seen lower, at 4.5 per cent and 5.7 per cent for 2001 and 2002, down from an April estimate of 5.6 per cent and 6.1 per cent, respectively.
The report sees 2002 global growth of 3.6 per cent, down from the 3.9 per cent the lender forecast in April.
These lower global forecasts come as the IMF has cut its estimate for growth in the 12-nation euro zone to 1.9 per cent this year and 2.3 per cent next year. In August, IMF economists had expected slightly better growth of 2.0 per cent this year and 2.5 per cent next, well below the 2.4 per cent and 2.8 per cent the WEO forecast in April.
The report, which takes the pulse of economies around the world and which will be released at the end of the month ahead of the fund's annual meetings, leaves forecasts for US growth unchanged at 1.5 per cent for 2001 and 2.5 per cent for 2002.
Details of the draft report obtained by Reuters last week revealed Japan is seen in recession this year, with a contraction of 0.2 per cent compared to the April forecast of 0.6 per cent growth.
Japan's prospects for 2002 have also been downgraded, to growth of 0.5 per cent compared to an earlier prediction of 1.5 per cent.
"The report shows a greater synchronization in the slowdown," the IMF source said. "The fact that this slowdown is becoming more widespread in itself increases downside risks because there are no engines of growth in case there are further shocks to the global economy."
The source said that while the latest global projection was "not that bad," it remains, "highly uncertain and there are a lot of risks accumulating on the downside."
The report looks at whether recent improvements in long-term US productivity, or worker output, are as strong as previously thought, and the possible impact if US productivity slackens -- a major threat.
Other risks highlighted are the potential decline in US consumer sentiment and what can be done to revitalise it should it erode, given tax cuts and low interest rates already in place.
The latest data, updated by IMF economists last Friday and distributed to the IMF's board, showed that within Europe, Germany's forecast took the largest knock.
German economic growth is now expected at 0.9 per cent and 1.9 per cent for 2001 and 2002, respectively. Those figures are below the August estimates of 1.2 per cent and 2.1 per cent for 2001 and 2002, and well below April's 1.9 per cent and 2.6 per cent forecasts for each year.
Growth in Britain is now seen at 2.0 per cent for 2001 and 2.4 per cent for 2002, down from August's preliminary forecast of 2.1 per cent and 2.6 per cent and well below April's 2.6 per cent and 2.8 per cent projections.
Italy's forecast for 2001 remains 2.0 per cent but 2002 growth is now seen lower at 2.3 per cent, weaker than August's 2002 forecast of 2.5 per cent. In April, the IMF saw Italian growth of 2.0 per cent and 2.5 per cent for 2001 and 2002.
The IMF source added that in general the WEO report was "on the optimistic side" because it naturally assumes strong policy actions from all countries.
The report makes no change to French prospects, previously seen at 2.6 per cent for both 2001 and 2002 and now expected at 2.1 per cent and 2.2 per cent, respectively. Growth for Canada is still expected at 2.3 per cent and 2.4 per cent for this year and next. Prospects in South Korea also remain unchanged, at growth rates of 3.5 per cent and 5.5 per cent for this year and next.
Other estimates being readied for the WEO report include weaker growth for Brazil, which is now expected to post growth of 2.2 per cent this year and 3.5 per cent next year, down from the 4.5 per cent growth in both years expected in April.
Forecasts for Russia, enjoying a boom of oil revenues as energy prices remain high, remain unchanged at 4.0 per cent for both this year and next.
And while almost the entire world is having their growth forecasts cut, China is swimming against the tide. The IMF has upped its 2001 forecast for that nation to 7.5 per cent from an earlier estimate of 7.0 per cent. The IMF's forecast for Chinese growth for next year remains unchanged at 7.1 per cent.
( REUTERS )
That forecast, being prepared for publication in the International Monetary Fund's World Economic Outlook later this month, has been shaved back from a 2.8 per cent growth rate staff economists had expected just last month.
Growth in India is seen lower, at 4.5 per cent and 5.7 per cent for 2001 and 2002, down from an April estimate of 5.6 per cent and 6.1 per cent, respectively.
The report sees 2002 global growth of 3.6 per cent, down from the 3.9 per cent the lender forecast in April.
These lower global forecasts come as the IMF has cut its estimate for growth in the 12-nation euro zone to 1.9 per cent this year and 2.3 per cent next year. In August, IMF economists had expected slightly better growth of 2.0 per cent this year and 2.5 per cent next, well below the 2.4 per cent and 2.8 per cent the WEO forecast in April.
The report, which takes the pulse of economies around the world and which will be released at the end of the month ahead of the fund's annual meetings, leaves forecasts for US growth unchanged at 1.5 per cent for 2001 and 2.5 per cent for 2002.
Details of the draft report obtained by Reuters last week revealed Japan is seen in recession this year, with a contraction of 0.2 per cent compared to the April forecast of 0.6 per cent growth.
Japan's prospects for 2002 have also been downgraded, to growth of 0.5 per cent compared to an earlier prediction of 1.5 per cent.
"The report shows a greater synchronization in the slowdown," the IMF source said. "The fact that this slowdown is becoming more widespread in itself increases downside risks because there are no engines of growth in case there are further shocks to the global economy."
The source said that while the latest global projection was "not that bad," it remains, "highly uncertain and there are a lot of risks accumulating on the downside."
The report looks at whether recent improvements in long-term US productivity, or worker output, are as strong as previously thought, and the possible impact if US productivity slackens -- a major threat.
Other risks highlighted are the potential decline in US consumer sentiment and what can be done to revitalise it should it erode, given tax cuts and low interest rates already in place.
The latest data, updated by IMF economists last Friday and distributed to the IMF's board, showed that within Europe, Germany's forecast took the largest knock.
German economic growth is now expected at 0.9 per cent and 1.9 per cent for 2001 and 2002, respectively. Those figures are below the August estimates of 1.2 per cent and 2.1 per cent for 2001 and 2002, and well below April's 1.9 per cent and 2.6 per cent forecasts for each year.
Growth in Britain is now seen at 2.0 per cent for 2001 and 2.4 per cent for 2002, down from August's preliminary forecast of 2.1 per cent and 2.6 per cent and well below April's 2.6 per cent and 2.8 per cent projections.
Italy's forecast for 2001 remains 2.0 per cent but 2002 growth is now seen lower at 2.3 per cent, weaker than August's 2002 forecast of 2.5 per cent. In April, the IMF saw Italian growth of 2.0 per cent and 2.5 per cent for 2001 and 2002.
The IMF source added that in general the WEO report was "on the optimistic side" because it naturally assumes strong policy actions from all countries.
The report makes no change to French prospects, previously seen at 2.6 per cent for both 2001 and 2002 and now expected at 2.1 per cent and 2.2 per cent, respectively. Growth for Canada is still expected at 2.3 per cent and 2.4 per cent for this year and next. Prospects in South Korea also remain unchanged, at growth rates of 3.5 per cent and 5.5 per cent for this year and next.
Other estimates being readied for the WEO report include weaker growth for Brazil, which is now expected to post growth of 2.2 per cent this year and 3.5 per cent next year, down from the 4.5 per cent growth in both years expected in April.
Forecasts for Russia, enjoying a boom of oil revenues as energy prices remain high, remain unchanged at 4.0 per cent for both this year and next.
And while almost the entire world is having their growth forecasts cut, China is swimming against the tide. The IMF has upped its 2001 forecast for that nation to 7.5 per cent from an earlier estimate of 7.0 per cent. The IMF's forecast for Chinese growth for next year remains unchanged at 7.1 per cent.
( REUTERS )