IMF sees US driving world growth

In latest report, fund says China's economic growth will slow to 7.5 per cent this year

PUBLISHED : Wednesday, 09 April, 2014, 1:40am
UPDATED : Wednesday, 09 April, 2014, 1:40am

Stronger US growth this year and next will help the world economy withstand weaker recoveries in emerging markets including Brazil and Russia, the International Monetary Fund said.

China's economic growth, it said, would slow to 7.5 per cent this year and 7.3 per cent in 2015, avoiding a "hard landing" if the government addresses risks and undertakes reforms.

The US is providing a "major impulse" to global growth that's still lumbering amid weakness in Japan and parts of Europe, the IMF said in a report yesterday. While Britain and Germany are adding to momentum, developing nations face new risks and Russia's takeover of Crimea last month injects geopolitical tension that's "casting a pall" on the region, the fund said.

The IMF urged emerging markets to prepare for flows of capital back to advanced economies and advised the European Central Bank that more monetary easing is needed now to keep deflation at bay.

"The US recovery is the strongest among advanced economies and therefore in a way it's pulling the world," IMF chief economist Olivier Blanchard said.

The fund predicted global growth of 3.6 per cent this year, compared with a January estimate of 3.7 per cent. Next year, the expansion will accelerate to 3.9 per cent, unchanged from the prior forecast.

"Global activity has broadly strengthened and is expected to improve further in 2014-15, with much of the impetus coming from advanced economies," the IMF report said. "Activity in many emerging-market economies has disappointed in a less favourable external financial environment."

The IMF sees the US accelerating to a 2.8 per cent expansion this year and 3 per cent in 2015, unchanged from forecasts in January.

In what it called a "worrying development", the fund lowered predictions for Brazil, Russia, South Africa and Turkey. Brazil growth was reduced to 1.8 per cent this year from 2.3 per cent, South Africa was cut to 2.3 per cent from 2.8 per cent and Russia to 1.3 per cent, from 2 per cent estimated in January.

On China, it said its outlook "is predicated on the assumption that the authorities gradually rein in rapid credit growth and make progress in implementing their reform blueprint so as to put the economy on a more balanced and sustainable growth path".

The estimates for growth in China's gross domestic product are unchanged from the IMF's previous forecasts in January.

But on Monday, the World Bank trimmed its own 2014 forecast to reflect "the bumpy start to the year", predicting China's GDP to grow 7.6 per cent this year, with its 2015 figure unchanged at 7.5 per cent.

Additional reporting by AFP