IMF Expects Global Economy to Expand Slower than Earlier Forecasted

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IMF Expects Global Economy to Expand Slower than Earlier ForecastedThe International Monetary Fund (IMF) predicts the global economy to grow in the final six months of this year and surge next year, though at a much weaker pace than forecasted.

IMF chief Christine Lagarde said that accommodative measures by central banks won’t impact on demand much and that nations should spend more on infrastructure, health and education in order to spur growth, though within manageable debt levels.

Lagarde signaled that the IMF’s global economic outlook, which is expected this month, may vary from the estimates given in April. IMF had projected the world’s economy to expand by 3.6 percent this year and 3.9 percent next year, reported Reuters.

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“Global activity is picking up but the momentum could be less strong than we had expected because potential growth is weaker and investment … remains subdued,” said Lagarde in an economic convention in France. “Despite the many responses to the crisis … recovery is modest, laborious, fragile, and measures to boost demand, despite the goodwill of central banks, will find their limits.”

She urged governments to invest more in infrastructure without placing undue pressure on public finances, though she acknowledged some countries lacked funds or capacity to do so. Lagarde also noted that the U.S. economy will accelerate provided the Federal Reserve eases its monetary policy in an orderly manner.

The IMF also expects the euro zone to emerge out of the recession and advised the countries to continue implementing reforms, such as fully implementing the banking union. Lagarde signaled that the Chinese economy won’t slow down suddenly, and that she expects it to expand by 7 to 7.5 percent in 2014. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com