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Wed, 17 Apr, 2013 12:10:26 AM
FTimes News Desk, April 17


The global economy seems to be recovering more slowly than expected, according to an update delivered by the International Monetary Fund on Tuesday to its forecast.

The IMF predicts that the economy will grow this year by 3.3 per cent. Next year, growth should accelerate to 4 percent. In January, the IMF predicted a slightly faster growth.

The global economic recovery slows down, particularly in the euro area and the U.S. problems, news agency STT reported quoting Reuters and AFP.

The Washington, D.C.-based international lender's World Economic Outlook shaved its 2013 forecast to 3.3 percent from 3.5 percent. It also trimmed its projection for 2014 to 4 percent from 4.1 percent.

IMF warns that the euro countries are at risk of falling into a long period of slow growth. If the growth continues this way, the debt crisis is difficult to solve.

U.S. economic growth threatens the public sector spending cuts. Finnish economy is projected to grow by 0.5 per cent this year and 1.2 percent next year.

Conditions have worsened further in the past three months, however, and the situation in Europe demands more "aggressive" action from policymakers, the IMF said.

"Europe should do everything it can to strengthen private demand," IMF's chief economist Olivier Blanchard said.

"What this means is aggressive monetary policy, and what this means is getting the financial system to be stronger — it’s still not in great shape."

The IMF said that private demand in the United States has been showing strength as credit and housing markets heal. But larger-than-expected fiscal adjustment is projected to keep real GDP growth to about 2 percent in 2013.

In the euro area, real GDP is projected to contract by about ¼ percent this year before growing again in 2014. “Credit channels are broken: better financial conditions are not yet passing through to companies and households because banks are still hobbled by poor profitability and low capital. Other brakes on growth in the euro area include continued fiscal adjustment, competitiveness problems, and balance sheet weaknesses,” the IMF said.

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