World Economic outlook - IMF Eurozone economic outlook 2012-2013 : Sharply downgraded forecasts by the International Monetary Fund show the Eurozone economy contracting this year before recovering meekly in 2013, with Italy's GDP shrinking for two consecutive years, the Italian news agency Ansa reported Thursday.
Citing a copy of the new forecasts to be published next Tuesday in the IMF's World Economic Outlook , Ansa said the Fund is now projecting that the Eurozone's GDP will drop by 0.5% this year - a downward revision of 1.6 percentage points from its previous forecasts last September. Growth will return in the Eurozone in 2013, but not robustly: the IMF is projecting a growth rate of 0.8% for next year.
Italy will fare far worse than the Eurozone average, however, with GDP set to plummet 2.2% this year -- a downward revision of 2.5 percentage points from the last forecast. Italy's economy will then continue to shrink in 2013, dropping another 0.6% on the year, according to the IMF projections, Ansa reported.
The Fund makes clear that in its view, the Eurozone is the sickest region in the world economy today. The single currency bloc is the "principal reason" for the deterioration of the world's economic outlook and the reason why downward economic risks have increased, it says.
"The global recovery is threatened by the growing tensions in the euro area," the IMF writes in its report, according to Ansa.
The main factors cited by the IMF for the euro area's expected drop into recession this year are the runup in yields on sovereign debt, a constriction of bank lending to the real economy, and the impact of deficit-cutting measures in many of the EMU states.
The most immediate political challenge," the Fund writes, "is to re-establish confidence and put an end to the euro area crisis, supporting growth." Budget cutting must be "sustainable," a credit squeeze must be contained, and more liquidity must be provided, "thanks to a more accommodative monetary policy," Ansa reported the IMF report as saying.
The IMF also expects the emerging economies to slow down, because of the worsening international environment and slowing domestic demand, Ansa reported. read growth forecast for developing countries 2012-2013
Germany's economy should eke out a meager increase of 0.3% this year, a downward revision of a full point. It is then projected to grow by 1.5% next year, unrevised from the September forecast.
France will barely grow this year, with GDP seen just 0.2% higher (1.2 percentage points below the previous forecast), followed by a still feeble 1.0% in 2013 (-0.9 point).
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