IMF sees global economy gaining, US growth slowing

by Associated Press

Published: October 6,2010

Tags: global economy, IMF

WASHINGTON (AP) – The global economy will likely strengthen the rest of this year and in 2011 as China and other emerging powers offset weakness in the United States and Europe.

That’s the latest outlook of the International Monetary Fund, which predicts the world economy will expand 4.8 percent this year and 4.2 percent next year. That would far surpass last year’s 0.6 percent decline, the worst since World War II. The IMF’s forecast for worldwide growth this year is 0.2 percentage point more than its previous estimate in July.

The international lending agency predicts the U.S. economy will grow 2.6 percent this year, below its previous estimate of 3.3 percent, and 2.3 percent next year.

The IMF’s forecast, released Wednesday, points to lingering weakness in the United States and Europe after the worst recession since the 1930s Great Depression.

The agency says the global economy will require a balancing act: Countries with huge trade and budget deficits such as the United States will need to boost exports. And countries with big trade surpluses such as China must reduce their dependency on exports and boost domestic demand.

The forecast was prepared for the annual fall meetings of the 187-nation IMF and its sister lending organization, the World Bank. Finance officials from the Group of 20, representing the world’s richest nations and fast-growing developing countries, are scheduled to hold talks Friday.

Obama administration officials said they planned to press other G-20 countries such as China to honor commitments they’ve made to reduce their huge trade surpluses, which come at the expense of other countries. Such trade imbalances contributed to the global downturn.

The prediction of 2.6 percent growth for the United States this year is historically weak coming after a recession. But it marks a sharp reversal from the 2.6 percent decline in U.S. activity last year. That was the steepest drop since 1946. The U.S. forecast is down from a 3.3 percent projection the IMF made in July.

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