Modest Growth Pickup in 2013, Projects IMF

Global growth to reach 3.5 percent in 2013, from 3.2 percent in 2012

Crisis risks abating, although downside risks remain significant

Emerging markets, developing countries, United States, main sources of growth

Policy actions have lowered acute crisis risks in the euro area and the United States, the report noted. Japan’s stimulus plans will help boost growth in the near term, pulling the country out of a short-lived recession. Effective policies have also helped support a modest growth pickup in some emerging market and developing economies. And recovery in the United States remains broadly on track. Global growth is projected to strengthen to 3.5 percent this year, from 3.2 percent in 2012—a downward revision of just 0.1 percentage point compared with the October 2012 WEO.

If crisis risks do not materialize and financial conditions continue to improve, global growth could even be stronger than forecast, the report said. But downside risks remain significant, including prolonged stagnation in the euro area and excessive short-term fiscal tightening in the United States.

Modest improvement in conditions

The report observed that economic conditions improved slightly in the third quarter of 2012, driven by performance in emerging market economies and the United States. Financial conditions also improved, as borrowing costs for countries in the euro area periphery fell, and many stock markets around the world rose. But activity in the euro area periphery was even softer than expected, with some of that weakness spilling over to the euro area core. And Japan moved into recession in the second half of last year.

Forecasts broadly unchanged, except for euro area

The IMF downgraded its near-term forecast for the euro area, with the region now expected to contract slightly in 2013. The report observed that even though policy actions have reduced risks and improved financial conditions for governments and banks in the periphery economies, those had not yet translated into improved borrowing conditions for the private sector. Continuing uncertainty about the ultimate resolution of the global financial crisis, despite continued progress in policy reforms, could also dampen the region’s prospects.

The IMF forecasts growth of 2 percent in the United...