The International Monetary Fund has warned that the globaleconomic recovery is in danger of unraveling unless policymakers in the US andEurope move quickly to fix their economies.
That stark message came on the opening day of the IMF andWorld Bank's meeting in Tokyo, where thousands of officials, executives andbankers will hold six days of talks on how to end the crisis.
In its latest quarterly report, the IMF said global growthwould slow to 3.3 percent this year, down from 3.5 percent in its last forecastin July. Next year growth is expected to slow to 3.6 percent, down from 3.9percent. The fund warned that the risk of a return to recession in advancedeconomies was “alarmingly high.”
It is the second time the IMF has cut its growth forecastssince April.
Hours before the German chancellor, Angela Merkel, was dueto visit to Greece to discuss conditions for the next tranche of bailout funds,officials in Tokyo said the euro zone's woes and uncertainty over US fiscalpolicy would continue to weigh on the international economy.
The momentum being created by central banks was not beingmatched by action from governments, the IMF said, adding that growth inadvanced economies had failed to make a dent in high unemployment rates.
The fund's chief economist, Olivier Blanchard, saidpersistent problems in developed economies were having a damaging dominoeffect. “Low growth in advanced economies is affecting emerging and developingeconomies through exports,” he told reporters in the Japanese capital.
But China, where growth forecasts have also been cut, isexpected to avoid a potentially catastrophic "hard landing" afteryears of phenomenal growth.
"China's situation reflects weaker externaldemand," said IMF adviser Thomas Helbling. "We expect the Chinese economyto pick up, but if the global economy slows down more than anticipated, then itmight have to take additional measures."
In its latest world economic outlook, the IMF said economicoutput was "expected to remain sluggish in advanced economies but stillrelatively solid in many emerging markets and developing economies."
