18) “Spain’s economy will also shrink in 2013, IMF believes”

by Javier Carro

Topics: Economy, Frontpage

The International Monetary Fund (IMF) cut its 2013 growth forecast for the crisis-hit euro zone to 0.7 percent, while maintaining its projection of a 0.3 percent contraction this year (2012), and, said it now believes Spain’s economy will shrink both this year 2012, and next 2013.

In a mid-year health check of the world economy, the IMF said emerging market nations, long a global bright spot, were being dragged down by the economic turmoil in Europe. It said a drop in exports in these countries would combine with earlier policies meant to prevent overheating and slow growth more sharply than hoped.

The IMF shaved its 2013 forecast for global growth to 3.9 percent from the 4.1 percent it projected in April, trimming projections for most advanced and emerging economies. It left its 2012 forecast unchanged at 3.5 percent. «Downside risks to this weaker global outlook continue to loom large,»

«The most immediate risk is still that delayed or insufficient policy action will further escalate the euro area crisis.» the IMF said.

The IMF sharply revised down its growth projections for the United Kingdom to 0.2 percent this year and to 1.4 percent in 2013.

In April, the fund said the UK economy would expand 0.8 percent in 2012 and 2.0 percent next year.

Central banks in China, the euro zone and Britain have all eased monetary policy in recent weeks to support growth. The U.S. Federal Reserve has said it is poised to do more if needed. It urged the creation of a pan-European deposit insurance guarantee program and a mechanism to resolve failing banks, and called on the ECB to provide ample liquidity to support banks under «sufficiently lenient conditions.» ∎

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