IMF Trims World, U.S. Growth Forecast

he International Monetary Fund on Tuesday trimmed its estimate of U.S. and world economic growth. The IMF lowered its global outlook by 0.2 percentage points this year and next, forecasting 3.1% growth in 2013 and 3.8% growth in 2014. The IMF now sees U.S. growth of 1.7% in 2013 and 2.7% in 2014, a reduction of 0.2 points both years, due to stronger fiscal contraction. The prior forecast was made in April. The IMF said that the downward revision to its forecast for the global economy was driven by slower growth in several key emerging market economies, as well as by a more protracted recession in the euro area. There is a risk of a longer growth slowdown in emerging-market economies, especially if capital flows out of those economies as the Fed pulls back from its stimulus plans, the international financial institution said. “Many emerging market and developing economies face a trade-off between macroeconomic policies to support weak activity and those to contain capital outflows,” the IMF said. Structural reforms can make this trade-off less stark, the agency added.


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