IMF warns US, EU nations over deficits
Source: Agencies |
June 18, 2011, Saturday
|
Print Edition
Print Edition
THE International Monetary Fund yesterday cut its forecast for United States economic growth and warned Washington and debt-ridden European countries that they are "playing with fire" unless they take immediate steps to reduce their budget deficits.
The IMF, in its regular assessment of global economic prospects, said bigger threats to growth had emerged since its previous report in April, citing the eurozone debt crisis and signs of overheating in emerging market economies.
The global lender forecast US gross domestic product would grow an anemic 2.5 percent this year and 2.7 percent in 2012. In its forecast just two months ago, it had expected 2.8 percent and 2.9 percent growth, respectively.
The outlook elsewhere was mixed. The IMF said it was slightly more optimistic about the euro area's growth prospects this year, but a lack of political leadership in dealing with that crisis and the budget showdown in the US could create major financial volatility in coming months.
"You cannot afford to have a world economy where these important decisions are postponed because you're really playing with fire," Jose Vinals, director of the IMF's monetary and capital markets department said in an interview in Sao Paulo, where the forecast was published.
In the US, the political problems include a fight over raising the debt ceiling.
Meanwhile, Greece has edged closer to default as eurozone officials disagree on a possible second aid package for the indebted country. With strikes and protests around the country, political turmoil has added to uncertainty, stoking fears that the government will not be able to tighten its belt enough to reduce deficits.
Forecasts for large emerging markets remained stable or slipped.
While China's GDP view stayed at 9.6 percent this year, the IMF lowered its forecast for Brazil to 4.1 percent from 4.5 percent in April.
The IMF, in its regular assessment of global economic prospects, said bigger threats to growth had emerged since its previous report in April, citing the eurozone debt crisis and signs of overheating in emerging market economies.
The global lender forecast US gross domestic product would grow an anemic 2.5 percent this year and 2.7 percent in 2012. In its forecast just two months ago, it had expected 2.8 percent and 2.9 percent growth, respectively.
The outlook elsewhere was mixed. The IMF said it was slightly more optimistic about the euro area's growth prospects this year, but a lack of political leadership in dealing with that crisis and the budget showdown in the US could create major financial volatility in coming months.
"You cannot afford to have a world economy where these important decisions are postponed because you're really playing with fire," Jose Vinals, director of the IMF's monetary and capital markets department said in an interview in Sao Paulo, where the forecast was published.
In the US, the political problems include a fight over raising the debt ceiling.
Meanwhile, Greece has edged closer to default as eurozone officials disagree on a possible second aid package for the indebted country. With strikes and protests around the country, political turmoil has added to uncertainty, stoking fears that the government will not be able to tighten its belt enough to reduce deficits.
Forecasts for large emerging markets remained stable or slipped.
While China's GDP view stayed at 9.6 percent this year, the IMF lowered its forecast for Brazil to 4.1 percent from 4.5 percent in April.
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