Global economy to grow 4.2% this year – IMF

Published by rudy Date posted on April 23, 2010

WASHINGTON (AP) — The International Monetary Fund (IMF) said the global economy, after enduring a crippling recession, should see better-than-expected growth this year, led by strength in China and other developing nations.

In an updated economic outlook, the IMF forecast that the world economy would expand 4.2 percent this year, faster than its previous projection and a sharp improvement from 2009 when global output fell by 0.6 percent, the worst performance since World War II.

However, the international lending agency warned that the recovery still remained vulnerable with the biggest threat likely to come from a surge in government debt burdens.

“The outlook for activity remains unusually uncertain,” the IMF said in its latest World Economic Outlook. Although a variety of risks have receded, downside risks related to the growth of public debt in advanced economies have become sharply more evident.

The IMF’s estimate that the global economy would grow 4.2 percent this year, represented a 0.5 percentage point increase from the IMF’s January forecast, for 2011, the IMF projected global growth of 4.3 percent, no change from its January outlook.

The IMF expects wide disparities between regions with the United States outperforming Europe and Japan but lagging behind China and other developing nations.

For the United States, the IMF expects growth of 3.1 percent this year, in line with private forecasters, after a 2.4 percent plunge in the US gross domestic product in 2009, the biggest decline since 1946.

The IMF forecast that China’s economy would surge 10 percent this year and that India would grow 8.8 percent. But it looked for the 16 European countries that share the euro currency would see economic growth of just one percent in 2010.

The new forecast was prepared for upcoming meetings of global financial leaders including daylong talks Friday involving the Group of 20 nations, hich include the world’s richest industrial countries and major developing nations including China, Brazil, India and Russia.

The US delegation will be led by Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke. The G-20 talks and weekend discussions at the IMF and World Bank are expected to focus on overhauling financial regulatory system and rebalancing global growth to make the recovery more sustainable.

US Treasury officials who briefed reporters Tuesday on Geithner’s agenda said they believed support was growing for a financial risk levy along the lines of one proposed by President Barack Obama that seeks to raise $90 billion from the largest US banks to recoup losses from the $700 billion financial bailout fund.

The US officials said they expected another key discussion topic would be the need to eliminate global imbalances, a goal that Obama and other G-20 leaders set at a summit in Fittsburgh last September.

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