IMF: Euro Crisis Could Spark New Global Slump

IMF: Euro Crisis Could Spark New Global Slump
6:26pm UK, Tuesday January 24, 2012

The International Monetary Fund has warned the world faces a new recession this year if the eurozone debt crisis gets worse.

The global economic watchdog has cut its world growth estimate to 3.25% from its previous forecast of 4%.

Forecasts for UK growth were cut by 1% to 0.6% - although the country is still expected to outperform Germany and France.

The IMF predicted the economy to grow 2% in 2013, down from 2.4%, the IMF said, as "intensifying strains" in the euro area affect the rest of the world.

IMF chiefs fear the eurozone debt crisis could worsen during 2012


It said global output will expand by 3.25% this year, a downward revision from 4%, as countries including Italy and Spain see their economies shrink and pull the rest of the single-currency bloc into recession.

The amended forecasts come ahead of the publication on Wednesday of the UK's eagerly-awaited gross domestic product (GDP) figures for the fourth quarter of 2011.

The IMF said the world's greatest economic challenge was putting "an end to the crisis in the euro area by supporting growth" while restoring public finance balance sheets and sustaining economic recovery.


Germany and France will enjoy smaller growth than the UK in 2012 according to the organisation, with projected figures of 0.3% and 0.2% respectively.

Meanwhile, it is forecast the US will grow by 1.8% while Japan will grow by 1.7%.

The downward revision to forecasts in the euro come as the cost of financing sovereign debt surges and eurozone governments try to clamp down on spending, the IMF said.

It warned austerity measures in Japan and the US - or a lack of - posed a threat to the global outlook in the medium term.