IMF Cuts Growth Forecast

Tokyo, Japan

The IMF released its World Economic Report in Tokyo on Tuesday and cut its growth forecast a second time for 2012 and 2013 amid signs that the global slowdown is gaining traction.

Concerns about policy making in Europe and the U.S. were cited in the report.

“Worries about the ability of European policymakers to control the euro crisis and worries about the failure to date of U.S. policymakers to agree on a fiscal plan surely play an important role, but one that is hard to nail down,” IMF Chief Economist Olivier Blanchard said.

IMF said that they expect global output to grow just 3.3 percent, lower than its July estimate of 3.5 percent. 

The IMF estimates a slow recovery in 2013 to 3.6 percent, lower than its July estimate of 3.9 percent.

The IMF report arrives a day after a lowered forecast for growth in the East Asia-Pacific region by the World Bank and new concerns about a prolonged China slowdown that is not immune from a recession in Europe and lower growth rates in the United States.

Meanwhile, EU Finance ministers from all the 27 countries in the EU meet in Luxembourg today ahead of a EU summit in Brussels on Oct. 18-19th.

EU Finance Ministers are attempting to establish a plan for a single system of bank supervision despite internal division about the timeline and implementation of a supervision model based around the ECB as supervisor.

The internal divisions are serious enough to make it unlikely that the Euro area will be able to meet its deadline of Jan. 1, 2013 for establishing the new bank supervisor.

Some countries want the Europe’s permanent bailout fund, the ESM (European Stability Mechanism), to have the capacity to lend Euros to banks directly, rather than lending through its sovereign governments as is the case at the present time.

EU leaders have previously agreed that the ECB (European Central Bank) must be put in charge as the supervisor of the banks before they receive money directly from the ESM permanent rescue fund.

 

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