IMF Predicts Global Economic Rebound Next Year

Washington, DC, July 8, 2009--The International Monetary Fund is predicting a stronger global economic rebound next year than it forecast in April as the financial system stabilizes.

IMF said in a revised forecast released today that the world economy will expand 2.5 percent in 2010, compared with its April projection of 1.9 percent growth. A contraction this year will be 1.4 percent, worse than an April forecast for a 1.3 percent drop, the IMF said.

The improved outlook for next year reflects differing stages of recovery across the globe, with emerging economies including China helping drive the world out of the worst recession in six decades, while Europe lags behind the U.S. and Japan. The fund warned that the pickup is likely to be “sluggish” and called repairing the international banking system a priority.

“The global economy is still in a recession but we’re inching towards a recovery,” IMF chief economist Olivier Blanchard said in a statement today. “We have to continue with the fiscal, monetary, financial policies which we have put in place.”

At the same time, the fund also called on policy makers to start crafting plans to exit such support measures in order to tame inflation concerns and take steps toward balancing public finances.

Advanced economies will continue to lead the slump this year by shrinking 3.8 percent. They will grow 0.6 percent in 2010, more than forecast in April, when the fund expected no growth for next year.

U.S. gross domestic product will shrink 2.6 percent this year before expanding 0.8 percent in 2010, the IMF said. In April it expected growth to stall next year.

Emerging and developing economies will grow 4.7 percent next year, a 0.7 percentage point increase from the previous forecasts. This year they will expand 1.5 percent, compared with a 1.6 percent expansion expected in April.