WASHINGTON -- For a change, there’s some good news on the global economic front: Growth is likely to improve this year, says the International Monetary Fund.
Led by stronger expansions in emerging and developing economies, and helped by policy actions that have lowered “acute crisis risks” in the euro area and the United States, global growth is expected to reach 3.5% this year, up from 3.2% in 2012, according to the IMF’s world economic outlook released Wednesday.
The new outlook, in line with the IMF’s October forecast, says the U.S. economy, by far the world’s largest, also should be a main source of global growth. By comparison, the IMF downgraded growth expectations for the 17-nation Eurozone, saying the region is now likely to remain in a mild recession this year.
That’s not to say that the U.S. economy is likely to advance robustly. The Washington-based IMF forecast calls for a modest 2% growth in America’s gross domestic product this year, consistent with many private forecasts, with GDP -- or total economic output -- rising to 3% in 2014.
Those rates pale next to China’s, which like other developing countries are in a different stage of economic growth and remain considerably poorer on a per capita basis. China, the world’s second biggest economy, is projected to see an 8.2% increase in GDP this year and 8.5% in 2014 after growth slipped to 7.8% last year. Including India, the developing economies in Asia as a whole are expected to expand by 7.1% this year and 7.5% in 2014.
Latin America also will pick up some steam, notably Brazil, with its GDP expanding 3.5% this year after sluggish 1% growth last year.
Also helping global growth this year is Japan, the world’s third largest economy. The IMF reckons Japan this year will pull out of its short-lived recession in the second half of last year, thanks to its more aggressive stimulus policies. Japan’s central bank on Tuesday unveiled a new inflation target and expanded monetary stimulus to overcome deflation and economic malaise.
But “significant downside risks” remain for the global economy, the IMF said. Japan needs to implement a credible fiscal policy. If the Eurozone doesn’t keep up the momentum for reforms, it will face “prolonged stagnation,” the report said.
As for the U.S., the IMF said its housing recovery and financial markets are helping support the recovery, but the organization cautioned that Washington should avoid “excessive fiscal consolidation in the short term.” And it called on the U.S. to promptly lift the debt ceiling.