IMF warns of a new economic crisis

The International Monetary Fund has urged Eurozone leaders to act swiftly in response to the debt crisis in Greece and Spain, or risk dragging down the global economy with another financial crisis. The IMF has warned that the situation was grave and could escalate into a wider downturn unless national leaders ended their disputes with a long-lasting deal.

As eurozone finance ministers met in Luxembourg for crisis talks and the launch of the euro's permanent rescue fund, the IMF urged Europe and the US to promote growth to help major developing economies like China, Brazil and India.

The Washington-based lender said at the start of its annual meeting, in Tokyo, that the "downside risks are judged to be more elevated than in the April 2012 or September 2011 world economic outlook reports". The annual assessment of the global economic situation said it was not clear whether the situation was another bump in the road to recovery or a worsening of the situation. "The answer depends on whether European and US policymakers deal proactively with their major short term economic problems," it said.

The warning comes against a backdrop of slowing GDP growth across developed countries and much of the developing world as trade dries up and governments increasingly hide behind protectionist barriers. Although Britain was singled out by the IMF as one of the developed nations expected to grow next year, chancellor George Osborne was forced to concede in his speech to the Conservative party conference on Monday that lack of growth in the past two years meant austerity measures could last until as long as 2018.

And the IMF admitted that it, like many other forecasting organizations, had underestimated the negative impact on growth of steep cuts in public spending. It said: "Staff research suggests that fiscal cutbacks had larger than expected negative short-term multiplier effects on output, which may explain some of the output falls."

The World Bank, which is holding its annual meeting alongside the IMF in Tokyo, added to the gloom with a report that warned of cuts in growth across the developing world. Stock markets tumbled as the prospects for growth was trimmed by the bank, which mainly lends to cash-strapped poorer countries.

The global economy will grow at 3.3% this year and 3.6% next year, the IMF said, down 0.2 and 0.3 points respectively from forecasts earlier this year. The UK is expected to suffer a 0.4% reduction in national income this year before recovering to 1.1% next year. Only two years ago, world output was 5.1% and the recovery from the 2008 crash seemed under way.

 

Comments  

 
0 #5 2013-11-16 22:50
In Europe the economic situation isn’t exactly an easy one, it’s been seriously hit by the economic crisis. European politicians really need to take responsibility for the situation and give the population in economic distress a bit of relief. Perhaps they should contact the specialists in the economic crisis to find out what needs to be done. One example would be to contact the Orlando Bisegna Index which has already helped many counties sort out their debts, business closures and unemployment so as to improve the economic situation for many families in need
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+8 #4 2013-09-17 17:35
මේ පෙනෙන්නේ ධනවාදී ආර්ථික ක්‍රමයේ අසාර්ථකත්වය නේද ?ඇයි තව දුරටත් අපි ඒ ක්‍රමය දෙසට නැඹුරු වෙන්නෙ ?
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0 #3 2013-07-11 06:55
[quote name=""]Why do we take this institute seriously?

Did they forecast the global financial crisis? No.
Did they see the banking crisis coming? No.
No did the genius RB Governor Cabarala did he predict?
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+1 #2 2013-04-19 23:38
An economy should be built from the ground up, and national policitians lack the competence to legislate for local issues. Perhaps they need advice from professional economic crisis specialists, such as the Orlando Bisegna Index, specialists in the economic crisis. Their specialists have helped various counties in the USA with debt problems, business failures and unemployment, thus improving the economic condition of many families.
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0 #1 2012-11-25 17:44
Why do we take this institute seriously?

Did they forecast the global financial crisis? No.
Did they see the banking crisis coming? No.

All they do is looking at this silly computer models and then make equally stupid predictions in the comfort of their elaborate officers.

Until they keep their feet on the ground, we must take their murmuring with a pinch of salt.

They are more or less responsible for chaos in the developing world for cajoling despots.
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