The International Mometary Fund, IMF, has raised its global economic forecast after it realised that the impact of a credit crunch was not as severe as had been first feared. The fund said it now expects the global economy to grow by 4.1 per cent in 2008, up from an initial forecast of 3.7 per cent in April and compared with five per cent growth in 2007.
Despite upgrading forecasts for the United Kingdom, UK, and United States, US, the IMF warned that the global economy remained in a tough spot saying policy makers need to balance growth, while dealing with inflation.” The global economy is in a tough spot, caught between sharply slowing demandn in many advanced economies and rising inflation everywhere, notably in emerging and developing countries. The top priority for policymakers is to head off rising inflationary pressure, while keeping sight of risks to growth.” the IMF said.
The commentys from the IMF may go some way to easing concerns that many of the world’s largest economies are heading for a prolonged recession, brought on by problems in the US housing market and the subsequent credit crunch. Based on its new calculations, the IMF expects the UK economy to grow by 1.8 per cent in 2008 and 1.7 per cent in 2009, up from a previous forecast of growth of 1.6 per cent in both years. The UK government has forecast growth of two per cent this year and 2.5 per cent in 2009.
According to the IMF, the US economy is also expected to perform better than initially forecast and it expects US growth of 1.3 per cent, up from an A pril forecast of 0.5 per cent. The IMF added that risks to the world economy from the financial sector remained elevated; and inflation was an increasing concern. It also pointed out that central banks and governments were having to juggle the twin problems of slowing economic growth and surging inflation, driven by record oil prices and higher food costs. On the positive side, the IMF said that demand in advanced and emerging economies might be more resilent than first thought to recent jumps in commodity prices, and be able to resist shocks from the financial sector.
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