WASHINGTON (UPI) — The International Monetary Fund in Washington said Tuesday global economic growth for this year and next would not reach expectations posted in July.
The global economy is now expected to grow 2.9 percent in 2013, down 0.3 percentage points from July’s forecast. For 2014, the world’s gross domestic product is expected to reach 3.6 percent growth, down 0.2 percentage points from July.
The global economy remains stuck in low gear, the IMF said, growing only 2.5 percent in the first half of 2013.
The global economy is growing at the same speed as it did in the second half of 2012, the IMF said in October’s World Economic Outlook, a frequently cited bi-annual report that includes predictions for both developed and emerging economies.
Tuesday’s report lands on economists’ doorsteps three days before the start of an annual economic meeting in Washington hosted by the IMF that is expected this year to focus on U.S. fiscal policy — or the lack of it given the partisan gridlock that a week ago resulted in a shutdown of non-essential U.S. government services.
The IMF outlook report wastes no time focusing on the United States, but the text quickly zeros in not on the budget impasse, but on the U.S. Federal Reserve where suggestions of a policy shift had global implications this summer.
“In particular, markets are increasingly convinced that U.S. monetary policy is reaching a turning point, and this has led to an unexpectedly large increase in long-term yields in the United States and many other economies, notwithstanding the Federal Reserve’s recent decision to maintain its asset purchases,” the report says in its opening paragraph.
The second country mentioned on page one is China, where “growth … is slowing,” the IMF said.
The report then draws attention to the eurozone. “At the same time, old problems — a fragmented financial system in the euro area and worrisomely high public debt in all major advanced economies — remain unresolved and could trigger new crisis,” the report says.
The October report projects U.S. economic growth at 1.6 percent in 2013 and 2.6 percent in 2014, estimates that are down 0.1 percentage points and 0.2 percentage points, respectively, from July’s forecast.
The eurozone economy, in contrast, is predicted to drop 0.4 percent in 2013 and rise 1 percent in 2014, IMF said. In Japan, growth is projected at 2 percent and 1.2 percent in 2013 and 2014, respectively.
In China, the IMF said the gross domestic product should come in at 7.6 percent in 2013 and 7.3 percent in 2014, significant drops from 2011, when the Chinese economy grew 9.3 percent.