The International Monetary Fund (IMF) says that an uneven global recovery continues, despite setbacks this year.
In a document [pdf] prepared for a meeting of G20 finance ministers and central bankers in Australia, the Fund says that activity has regained momentum from its weak start in 2014Q1, led by the United States and China, but overall performance in the first half of the year was weaker than projected in the April World Economic Outlook (WEO) report. "With financial conditions exceptionally supportive and fiscal consolidation moderating, the recovery is projected to continue, albeit at a moderate and uneven pace."
The Fund says new downside risks associated with geopolitical tensions and increasing risk taking are arising. Other risks stem from low inflation, secular stagnation in advanced economies, lower growth in emerging economies, and the challenge of monetary policy normalization in the United States, in particular the possibility of financial instability due to abrupt market corrections.
The IMF says: "In the medium term, the risk of secular stagnation (a prolonged period of low growth and weak demand) in the major advanced economies, especially the euro area and Japan, cannot be ruled out."
The Fund forecasts that growth will accelerate in advanced economies in 2015, with the US and the UK having the strongest rebound. However, the outlook for the Eurozone and Japan is more uncertain, as inflation remains below central bank targets.