Business, Economics and Jobs

IMF cuts world growth forecast 3rd time this year

The International Monetary Fund trimmed its 2013 world economic growth forecast for the third time this year on Tuesday, citing the continued eurozone recession and slowdowns in developing nations like Brazil and China.

The IMF's revised World Economic Outlook predicts 3.1 percent growth this year, down from a previous projection of 3.3 percent made three months ago, and down from a January forecast of 3.5 percent.

The decline means the IMF's 2014 projection also takes a hit, with an initial 4.0 percent growth down to 3.8.

The Washington-based group explains its less optimistic outlook is to a large extent due to an "appreciably weaker domestic demand and slower growth in several key emerging market economies, as well as a more protracted recession in the euro area."

IMF chief economist Oliver Blanchard told The New York Times that the update came as the fund also lowered is expectations for India, Mexico, South Africa and Russia.

“It’s clear that these countries are not going to grow at the same rate as they did before the crisis,” he said.

The international fund summarized its position:

"While old risks remain, new risks have emerged, including the possibility of a longer growth slowdown in emerging market economies, especially given risks of lower potential growth, slowing credit, and possibly tighter financial conditions if the anticipated unwinding of monetary policy stimulus in the United States leads to sustained capital flow reversals."  

It's unclear if the Federal Reserve will continue or curb its stimulus program. But FED Chairman Ben Bernanke has hinted that the central bank could slow its efforts later this year.