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IMF cuts global forecasts and warns of debt crisis

Washington, Wed, 25 Jan 2012 ANI

Washington, Jan.25 (ANI): The International Monetary Fund (IMF) has said that it is cutting its forecasts for growth and warning of a deeper downturn if Europe doesn't take stronger action to stem its debt crisis.


The global economy will expand 3.3 percent, this year, down from 3.8 percent last year, said the IMF, which in September had forecast four percent growth in 2012.


According to the Wall Street Journal, Europe is likely to experience at least a mild recession this year, but the outcome could be far worse if euro-zone leaders fail to halt the rise of state borrowing costs and growing squeeze on bank credit, the IMF said.


In an update of its World Economic Outlook, the IMF said inaction could cause the euro-zone economy to shrink by four percent on average in each of the next two years, and lop two percentage points off global output this year.


Overall, the IMF sees global growth slowing but not collapsing, and many advanced economies avoiding a second recession.


The IMF is also urging the Group of 20 industrialized and developing countries to boost the fund's lending resources to over one trillion dollars.


That way, Europe could use its bailout fund to help boost banks' cash levels and keep its euro-zone financing costs down while the IMF helps bail out ailing economies.


The fund also wants the European Central Bank to continue its bond-buying program, maintain ample credit in the financial system and ease policy interest rates. (ANI)


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