Today’s World Economic Outlook report from the IMF predicts global growth strengthening gradually this year, up to 3.5% from 3.2% in 2012. It suggests that action already taken has helped to reduce economic risks, saying: “Policy actions,” it says, “have lowered acute crisis risks in the euro area and the United States. Japan’s stimulus plans will help boost growth in the near term, pulling the country out of a short-lived recession.”
The report published today goes on to say: “Effective policies have also helped support a modest growth pickup in some emerging market and developing economies.”
In November last year, the OECD’s Economic Outlook claimed that effective policies are still required, arguing: “Decisive policy action is needed to ensure that stalemate over fiscal policy in the United States and continuing euroarea instability do not plunge the world back into recession.”
Both agree that any recovery will be a slow, hesitant one, with the IMF going on to say policies must still address downside risks to bolster growth.
“If crisis risks do not materialise and financial conditions continue to improve, global growth could even be stronger than forecast. But downside risks remain significant, including prolonged stagnation in the euro area and excessive short-term fiscal tightening in the United States.”
Economic conditions did improve slightly in Q3 last year, thanks to emerging market economies and an uptick in the US.
More good news came from borrowing costs for countries in the euro area periphery reducing while many stock markets around the world rose.
The IMF downgraded its short-term forecast for the eurozone to a slight contraction; the OECD agrees, forecasting a 0.1% GDP fall before picking up to 1.3% in 2014. Both organisations predict US growth will be 2%.
