GDP growth in 2011 to be slower than thought, says IMF

A solar powered bicycle under developmet in China The report highlights vast differences in growth between advanced and developing economies

The global economy will grow slightly more slowly than previously expected next year, the International Monetary Fund (IMF) has said.

It predicted GDP would increase by 4.2% in 2011, down from an earlier forecast of 4.3%.

And while economic recovery was likely to continue, it warned that risks were high.

There are worries that as governments try to reduce their debt burdens and cut spending, growth may suffer.

On Tuesday, the IMF said that the global financial system remained the weak link in the economic recovery.

It predicted a gradual improvement in the financial system, but added that there was a substantial risk of further problems.

'Vulnerable'

The latest report, the IMF's World Economic Outlook, highlighted the difference in growth expected in the advanced and emerging economies.

In advanced economies - including the US, the UK, Japan and key EU nations - it said that the financial sector was "still vulnerable to shocks", adding that "growth appears to be slowing" as government stimulus efforts began to be withdrawn.

Analysis

It is a recovery and it will continue, the IMF tells us. In the developed world, that is about as good as it gets.

For a recovery from a deep recession, growth in those countries is likely to be unusually sluggish.

Unemployment will stay high. Financial systems and property markets could cause more trouble. Fixing damaged public finances needs to start in earnest next year, so governments can't do much by way of stimulus, although central banks could do more.

The developing world is another story. The weakness in rich countries does matter to them, but the IMF is forecasting robust growth for many emerging economies.

This would lead to growth of 2.8% in 2010 and 2.2% next year - from an earlier prediction of 2.4%.

However, economic growth in what it classes as emerging and developing economies - which include Brazil, Russia, India and China - will be 6.4% next year, it said, unchanged from earlier predictions. This year it is expecting growth of 7.1%, slightly better than previously stated.

Unemployment issue

The IMF forecast was prepared for the annual autumn meeting it holds with the World Bank.

It said that while its prediction of 2.6% growth for the US in 2010 was historically weak in the aftermath of a recession, it was a vast improvement on the 2.6% decline in US economic activity in 2009.

And it said growth prospects were weaker in Europe - with the 16 nations in the eurozone set to see their economies average 1.7% growth this year and 1.5% in 2011.

The report also suggested that there were more than 210 million people across the globe who are unemployed - an increase of more than 30 million since 2007.

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