IMF ups global economy forecast, retains Indias projection

Washington: The International Monetary Fund on Tuesday raised growth forecast for global economy to 4.4 per cent while retaining the projection for India at 8.4 per cent for calendar year 2011.

The multilateral lender International Monetary Fund (IMF), however, cautioned that downside risks to global recovery remain “elevated”.

In October last year, IMF had pegged the world economic expansion at 4.2 per cent in 2011.

The upward revision in growth estimate has come on the back of “stronger-than-expected activity in the second half of 2010 as well as new policy initiatives in the U.S. that will boost activity this year,” IMF said in an update to its World Economic Outlook report.

Meanwhile, IMF has retained the October 2010 growth projection for India and China. While Indian economy is expected to expand 8.4 per cent this year, China is projected to grow 9.6 per cent during the same period.

In calendar 2012, India is projected to clock a growth of 8 per cent.

The lender also pointed out that world economy is seeing a ‘two-speed recovery’ — implying that developed nations are expanding at a slower pace than emerging markets.

To ensure robust recovery, IMF said that countries should take steps to overcome financial troubles in euro area as well as initiate policies to redress fiscal imbalances.

“These need to be complemented with policies that keep overheating pressures in check and facilitate external re-balancing in key emerging economies,” IMF said.

According to the multilateral lender, many emerging economies are facing inflation pressures and there are even signs of overheating, partly due to strong capital inflows.

World economy is expected to expand 4.5 per cent in 2012, it noted.