IMF forecast: A ‘very fragile’ global recovery

Workers stand on scaffolding at a road construction site in Beijing. Economic growth around the world, including in China, will continue, according to the IMF. But the environment remains fragile.
(Alexander F. Yuan / AP Photo)

Global economies — advanced and otherwise — are looking up, according to the International Monetary Fund. But the incoming growth that the organization foresees will happen on perilous ground.

Economic output worldwide will increase 3.5% in 2012 before surging 4.1% the year after, according to the IMF’s forecast, which improved its outlook from January. But unemployment will stay high and the specter of rising oil prices will continue to hover, the report found.

New policies implemented by established markets have “reduced the threat of a sharp global slowdown” and will help them achieve a “weak recovery,” according to the IMF’s World Economic Outlook. Advanced economies are set for a 1.4% expansion in 2012 — though that’s less than half the 3.2% growth rate of 2010.


In emerging and developing markets, activity will remain “relatively solid” with a 5.7% boost, though retreating a bit from the 6.2% growth achieved last year.

The “recent improvements are very fragile,” according to Tuesday’s report.

“For the past six months we’ve been on a roller coaster ride,” said IMF Chief Economist Olivier Blanchard in a statement. “Our baseline is that growth is going to be slow in advanced economies; sustained, but not great, in emerging market and developing economies.”

But, he added: “The risk of things turning bad again in Europe is high.”

Countries such as Germany and France may manage to eke out growth, but Europe overall will continue to struggle as it deals with high sovereign debt, bank deleveraging efforts and low confidence.

The IMF, which along with the OECD has for months been prophesying recessionary winds in the Eurozone, said the area’s economy will shrink 0.3% this year.

Asia, which will be coping with tepid demand from abroad, will see its overall economy expand 6%. Japan will continue to recover from last year’s earthquake and tsunami with 2% growth.

China, which the World Bank last week said is headed for a “soft landing” after superheated growth, will expand its economy at a slower 8.2% pace after last year’s 9.2% rate.

The U.S. is on a steady climb, with the American economy expected to grow 2.1% this year and 2.4% next year after expanding 1.7% in 2011. That’s due in part to “stronger labor market outcomes,” even though recent figures for March were disappointing.

But looking forward, the IMF said that the U.S. will face challenges as it deals with a weak housing market, interest rate policies and increasing government debt.


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