IMF says risks to global growth have intensified

WASHINGTON — The International Monetary Fund (IMF) said on Friday that downside risks to global recovery have intensified due to recent turbulence in sovereign debt markets and continued financial sector weakness.

The IMF, in a briefing note prepared for Group of 20 deputy finance ministers, said global growth had been somewhat stronger than expected during the first half of 2010, “but is projected to slow temporarily during the second half of 2010 and the first half of 2011.”

It said European policy actions to calm the eurozone debt crisis have eased market concerns.

“Renewed turbulence in sovereign debt markets could precipitate an adverse feedback loop between sovereigns and the financial sector, with spillovers to the real economy…,” it said.

The IMF also cited the US property market as a source of downside risk, with increased foreclosures further pressuring bank balance sheets and possibly causing a reduction in credit available to the economy.

The G20 “surveillance note”, prepared for a Sept. 4-5 meeting in South Korea, did not change any of the IMF’s forecasts. The Fund predicts global output will expand 4.6% in 2010 and 4.3% in 2011. — Reuters