Global economic recovery is gaining traction, although risks from the eurozone financial crisis might feed in to slow the growth, says the International Monetary Fund (IMF).
In its latest World Economic Outlook, the IMF said the two speed recovery ÔÇô with growth in advanced economies more modest than in emerging economies ÔÇô was shifting gear as economic titans, the United States and Japan, saw a rise in consumption.
“In advanced economies, activity has moderated less than expected, but growth remains subdued, unemployment is still high, and renewed stresses in the euro area periphery are contributing to downside risks,” the IMF said.
The global economy would likely expand 4.4 percent this year, a touch higher than the 4.2 percent the IMF forecast in October. Emerging and developing economies ÔÇô including China, India, Brazil and Russia ÔÇô are expected to keep growing briskly despite rising inflationary pressures. The 2011 growth figure for emerging economies has been revised upward to 6.5 percent from an October projection of 6.4 percent. Similar growth is expected next year, the IMF said.
At 5.8 percent, sub-Saharan Africa is expected to show the most robust regional progress, but the report saw no change in its forecast for the rest of the world with the Asian giants leading the way: China at 9.6 percent and India at 8.4 percent growth. Unchanged, too, was the forecast for Japan and the 17-country eurozone at 1.5 percent.
“Capital flows to emerging markets were both a blessing and potentially a curse,” said IMF Chief Economist Olivier Blanchard. These flows were providing a mixed bag of cheap imports as well as the danger of the economies overheating in trying to handle the large influx of funds.
Blanchard said the influx was “a combination of the fact that the countries are doing well so their growth prospects are very good, and the fact that interest rates in advanced countries are not so high, they are very low, so there’s a strong incentive to take your funds to emerging market countries”.
Meanwhile, the International Labour Organisation (ILO) said the global number of unemployed people remained flat at 205 million year-on-year. Workers in developed economies and those aged between 15 and 24 were hardest hit, according to 2011 Global Employment Trends, a report released by the UN labour agency. The unemployment rate climbed down to 6.2 percent last year, down 0.1 percent from 2009, the report noted.