Wall Street Journal
January 24, 2012
The global economy is slowing this year, the International Monetary Fund said Tuesday, cutting its forecasts for growth and warning of a deeper downturn if Europe doesn't take stronger action to stem its debt crisis.
The global economy will expand 3.3%, this year, down from 3.8% last year, said the IMF, which in September had forecast 4% growth in 2012.
Europe is likely to experience at least a mild recession this year, but the outcome could be far worse if euro-zone leaders fail to halt the rise of state borrowing costs and growing squeeze on bank credit, the world's emergency lender said in an update of its World Economic Outlook. Inaction could cause the euro-zone economy to shrink by 4% on average in each of the next two years, and lop two percentage points off global output this year, the fund said.
"The world recovery, which was weak in the first place, is in danger of stalling," IMF chief economist Olivier Blanchard said. "But there is an even greater danger, namely that the European crisis intensifies. In this case, the world could be plunged into another recession," he said.
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