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April 16th, 2013 
Peter Nolan
THE IMF has cut its world growth forecast for 2013 as the eurozone recession continues to drag, but predicts growth overall will pick up in the second half of the year.
In its newest assessment of the global economy, the International Monetary Fund said world output would expand by 3.3 per cent this year, compared to the 3.5 per cent it predicted in January.
That left the pace of the world economic expansion virtually flat from 2012’s 3.2 per cent, with slower-than-expected growth in the United States and prolonged stagnation in the euro area the key reasons behind the downgrade.
Despite some promising signs, though, the IMF expressed concerns over a global fragmentation between the dynamism of the emerging countries, the United States just puttering along in second gear, and the eurozone stagnating.
“We are in a better place but … we’re not out of the woods,” said Olivier Blanchard, IMF chief economist, at a media conference.
The global crisis lender said that short-term risks still loomed especially in the eurozone, where Cyprus’s fresh bailout and Italy’s weaknesses could still spark fresh setbacks.
“The slump in the eurozone is worrisome,” said Blanchard.
But the IMF also saw growth slower in large emerging economies like Russia, China, Brazil and India, underscoring the global sense of economic weakness.
“Global prospects have improved again but the road to recovery in the advanced economies will remain bumpy,” the IMF said in its World Economic Outlook report.
“In the medium term, the key risks relate to adjustment fatigue, insufficient institutional reform, and prolonged stagnation in the euro area as well as high fiscal deficits and debt in the United States and Japan.
“In this setting, policymakers cannot afford to relax their efforts.”
With immediate crises out of the way, the Fund stuck close to its previous estimate for global growth in 2014, predicting a 4.0 per cent expansion, “assuming that policymakers avoid setbacks and deliver on their commitments.”
Generally prospects were better since last year after two of the largest short-term threats to the global recovery were defused: the threat of a breakup of the eurozone and a potentially sharp contraction in the United States driven by extreme budget cuts and tax hikes.
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