The world economy will grow at a 4.2 percent pace this year, stronger than expected a few months ago, the International Monetary Fund (IMF) said Wednesday.
What’s happening is a “multi-speed” expansion, with emerging-market nations generally moving faster than advanced economies, the IMF said. The broad pattern, though, is that almost all nations are growing and faring much better than last year.
The “World Economic Outlook” report sees 3.1 percent growth for the United States this year, while acknowledging large uncertainty for its predictions in the US and elsewhere.
If any continent appears to be the laggard, it’s Europe, with many nations still in recession or with growth so tepid – in the 1 percent range – that recovery is barely discernible.
By contrast, from Latin America to Asia and Africa, developing and emerging economies are showing solid growth. The performance isn’t spectacular, but the clout of rising nations is visible in this fact: The IMF’s overall forecast for global growth (4.2 percent, up from 3.9 percent in January) is substantially higher than the growth expected this year for industrialized economies such as the US, Japan, or European Union.
Easing of monetary policy, stimulus spending by governments, and regulatory efforts to defuse problems in credit markets have all played a role in the pickup. Global commerce has been reviving alongside consumer confidence within many nations.
“The outlook for activity remains unusually uncertain, even though a variety of risks have receded,” the report said.
One prominent risk: Banks in the US and Europe still remain exposed to weak real estate markets. Also, the IMF said it’s possible that “market concerns about sovereign liquidity and solvency in Greece could turn into a full-blown and contagious sovereign debt crisis.”
Although such a crisis may not occur, rising government debt leaves many nations with little room to maneuver if the world economy was hit by a new shock.
Still, a separate IMF report this week also shows nations have made some headway in combating the crisis in private credit markets.
The reports comes ahead of a weekend meeting of the IMF and World Bank, at which finance ministers will consider ways to make the global economy better insulated from financial shocks like the crisis of 2008.