Global Economy
Global recovery stalls; Downside risks intensify says IMF
By Finfacts Team
Jan 24, 2012 - 3:03 PM

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The global recovery has stalled with downside risks intensifying according to the IMF (International Monetary Fund) today. The Fund says the outlook is threatened by intensifying strains in the Eurozone and fragilities elsewhere.

Financial conditions have deteriorated, growth prospects have dimmed, and downside risks have escalated. Global output is projected to expand by 3¼% in 2012 - - a downward revision of about ¾%age point relative to the September 2011 World Economic Outlook (WEO).

This is largely because the Eurozone economy is now expected to go into a mild recession in 2012 as a result of the rise in sovereign yields, the effects of bank deleveraging on the real economy, and the impact of  additional fiscal consolidation. Growth in emerging and developing economies is also expected to slow because of the worsening external environment and a weakening of internal demand.

The Fund says the most immediate policy challenge is to restore confidence and put an end to the crisis in the euro area by supporting growth, while sustaining adjustment, containing deleveraging, and providing more liquidity and monetary
accommodation. In other major advanced economies, the key policy requirements are to address medium term fiscal imbalances and to repair and reform financial systems, while sustaining the recovery. In emerging and developing economies, near-term policy should focus on responding to moderating domestic growth and to slowing external demand from advanced economies.

World Economic Outlook Update [pdf] 

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