IMF Survey : Modest Growth Pickup in 2013, Projects IMF

IMF News, January 23, 2013

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Global growth projected to strengthen to 3.5 percent in 2013, from 3.2 percent in 2012.
The 2013 projection is a downward revision of just 0.1 percentage point compared with the October 2012 WEO.
Recovery is gradual and slow; policies must address downside risks to bolster growth.
If crisis risks do not materialize and financial conditions continue to improve, global growth could be stronger than forecast.

Economic conditions improved slightly in Q3 2012, driven by performance in emerging market economies and the United States.
Financial conditions improved: borrowing costs for countries in the euro area periphery fell, and many stock markets rose.
Activity in the euro area periphery was softer than expected, with some weakness spilling over to the euro area core.
Japan moved into recession in the second half of 2012.
Japan’s stimulus plans will help boost growth in the near term, pulling the country out of a short-lived recession.

Euro area: near-term forecast downgraded; the region is now expected to contract slightly in 2013.
- Policy actions reduced risks and improved financial conditions for governments and banks in periphery economies, but had not yet translated into improved borrowing conditions for the private sector.
United States: IMF forecasts growth of 2 percent in 2013, broadly unchanged from the October 2012 WEO.
- A supportive financial market environment and a housing market turnaround will support consumption growth.
Japan: Near-term outlook unchanged despite slipping into recession; stimulus package and further monetary easing will boost growth.
Emerging market and developing economies: expected to grow by 5.5 percent in 2013, broadly as predicted in the October 2012 WEO.

Crisis risks have abated in the euro area and the United States, but downside risks remain significant.
Major downside risks include:
- Prolonged stagnation in the euro area.
- Excessive short-term fiscal tightening in the United States.
The risk of prolonged stagnation in the euro area would rise if momentum for reform is not maintained.
If crisis risks remain contained and financial conditions keep improving, growth could exceed the baseline projection.

Euro area:
- Continue adjustment programs in periphery countries.
- Deploy “firewalls” to prevent contagion.
- Take further steps toward banking union and fiscal integration.
United States:
- Avoid excessive fiscal consolidation in the short term.
- Promptly raise the debt ceiling.
- Agree on a credible medium-term fiscal consolidation plan, focused on entitlement and tax reform.
Japan:
- Establish a credible medium-term fiscal strategy to mitigate risks that the stimulus-induced recovery could prove short lived and that the debt outlook could worsen.
Emerging market and developing economies:
- Rebuild policy room for maneuver.
- Pace rebuilding to balance external downside risks against risks of rising domestic imbalances.

Source: IMF Survey : Modest Growth Pickup in 2013, Projects IMF — January 23, 2013.