The International Monetary Fund (IMF) has lowered its global growth forecast to 4% in 2012, from over 5% in 2010.
In its latest World Economic Outlook, which was published yesterday, it warns that the global economy has entered “a dangerous new phase”.
Global activity has weakened and become more uneven, confidence has fallen sharply recently, and downside risks are growing.
Advanced economies are expected to grow at an anemic pace of 1.5% this year and 2% next year. Emerging economies, on the other hand, are expected to grow at a solid pace of 6% next year.
The organisation predicts a “continuing, but weak and bumpy, expansion” for advanced economies, while also warning that the prospects for emerging economies have become more uncertain again, even though growth is expected to remain robust.
Both the eurozone crisis and structural issues in the US are significant downside risks to the global economy.
The organisation urges policymakers to swiftly ratify the commitments made at the July summit and the European Central Bank to intervene strongly in order to maintain orderly conditions in the sovereign debt markets.
Other downside risks are the political impasse over fiscal consolidation in the US, where the housing market is weak, household savings decrease and financial conditions deteriorate.
©2011 funds europe