WASHINGTON – The global economy will likely strengthen the rest of this year and in 2011 as China and other emerging powers offset weakness in the United States and Europe.
Canada will continue to lead the United States in terms of growth, according to the latest outlook of the International Monetary Fund, but the IMF’s estimates for both countries has been lowered since the previous outlook in July.
The IMF predicts the world economy will expand overall by 4.8 per cent this year and 4.2 per cent next year.
That would far surpass last year’s 0.6 per cent decline, the worst since the Second World War ended in 1945. The IMF’s forecast for worldwide growth this year is 0.2 percentage point more than its previous estimate in July.
The world lending agency estimates Canada’s economy will expand by 3.1 per cent this year and 2.7 next, slower than its predictions in the summer.
The IMF predicts the U.S. economy will grow by only 2.6 per cent this year, below its previous estimate of 3.3 per cent, and by 2.3 per cent next year.
The IMF’s forecast, released Wednesday, points to lingering weakness in the United States and Europe after the worst recession since the Great Depression.
The agency says the global economy will require a balancing act: Countries with huge trade and budget deficits such as the United States will need to boost exports. And countries with big trade surpluses such as China must reduce their dependency on exports and boost domestic demand.
The IMF forecast was prepared for the annual fall meetings of the 187-nation IMF and its sister lending organization, the World Bank. Finance officials from the Group of 20, representing the world’s richest nations and fast-growing developing countries, are scheduled to hold talks Friday.
Obama administration officials said they planned to press other G-20 countries such as China to honour commitments they’ve made to reduce their huge trade surpluses, which come at the expense of other countries. Such trade imbalances contributed to the global downturn.
The prediction of 2.6 per cent growth for the United States this year is historically weak coming after a recession. But it marks a sharp reversal from the 2.6 per cent decline in U.S. activity last year. That was the steepest drop since 1946. The U.S. forecast is down from a 3.3 per cent projection the IMF made in July.
But the U.S. economy slowed sharply in late spring and summer this year as the European debt crisis shook the confidence of investors and businesses. The IMF’s forecast of 2.3 per cent U.S. growth for 2011 is down from its three per cent estimate in July.
Growth prospects are even weaker in Europe. The 16 nations that use the common euro currency will see their economies average 1.7 per cent growth this year and 1.5 per cent next year, the IMF says. Still, both those forecasts are upgrades from July, following a debt crisis that began in Greece and had threatened to widen throughout Europe.
Growth in Japan is projected to be 2.8 per cent in 2010 and 1.5 per cent in 2011. Its 2011 estimate was trimmed because Japan is still struggling to emerge from nearly two decades of anemic growth.
Combined, advanced economies such as the United States and Europe are forecast to grow 2.7 per cent this year and 2.2 per cent next year.
By contrast, emerging and developing economies such as those in China, Russia, Eastern Europe and Latin America, are expected to expand 7.1 per cent this year and 6.4 per cent in 2011 — more than double the growth rates of the advanced economies.