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IMF lowers global growth forecast, warns of risks to economic recovery

April 16, 2013|By Jim Puzzanghera
  • A woman walks by a banner in Athens bearing slogans against public sector layoffs.
A woman walks by a banner in Athens bearing slogans against public sector… (Louisa Gouliamaki / AFP…)

WASHINGTON -- The International Monetary Fund on Tuesday lowered its forecast for global economic growth this year from projections made three months ago, and warned policymakers that they could not relax their efforts as risks to the recovery remain.

The organization projected the worldwide economy would grow at a 3.3% annual rate this year, down from a January forecast of 3.5%. The projection for 2014 also was trimmed, with growth now forecast at a 4% rate compared with a 4.1% forecast in January.

Growth last year was 3.2%.

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Despite the downgraded forecast, the IMF said global economic conditions had improved over the past six months as two major potential problems were avoided -- the threat of a breakup of the Eurozone and the so-called fiscal cliff in the United States.

“We have moved from a two-speed recovery to a three-speed recovery,” IMF chief economist Olivier Blanchard.

He said that growth appeared strong in emerging markets and developing economies. But while the U.S. economy is improving, the Eurozone is facing a continued recession, with a projected contraction of 0.25% this year.

There are risks looming as well in what the IMF described as a "bumpy recovery."

In the U.S., the large automatic federal budget cuts known as sequestration and another potential battle over raising the nation's debt limit this summer "could exert a stronger drag on growth."

But while the across-the-board cuts aren't the best way to reduce spending, they are helping to reduce the U.S. debt, Blanchard said.

"The sequester …is the wrong way of doing things, but it does something," he said.

The IMF projected Tuesday the U.S. economy would grow 1.9% this year and 3% in 2014. The January forecast was for 2% growth this year and 3% next year.

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