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Sat, Jul 19, 2008 - Page 10 News List

IMF lifts its world growth forecast but warns on inflation

AFP , WASHINGTON

The IMF on Thursday lifted growth forecasts modestly for the world, including the US, but said the global economy is in a “tough spot” because of rising inflation amid a slowdown.

Global output is expected to climb 4.1 percent this year, up from its April projection of 3.7 percent, the IMF said in an update of its April World Economic Outlook.

But the report also dramatically boosted the inflation outlook.

For next year, the forecast calls for 3.9 percent global growth, up a notch from its earlier call of 3.8 percent.

IMF chief economist Simon Johnson said there is still “a chance of a global recession,” which many economists define by global growth below 3 percent.

Johnson said the overall growth picture is “roughly” the same as in April, but that “the situation has become more complicated since April because of the inflation problem.”

“The global economy is in a tough spot, caught between sharply slowing demand in many advanced economies and rising inflation everywhere, notably in emerging and developing economies,” the report said. “Global growth is expected to decelerate significantly in the second half of 2008, before recovering gradually in 2009. At the same time, rising energy and commodity prices have boosted inflationary pressure, particularly in emerging and developing economies.”

The IMF raised its inflation forecast for this year sharply to 3.4 percent for advanced economies, from its April figure of 2.6 percent. For emerging economies, prices are expected to soar 9.1 percent, up from an earlier estimate of 7.4 percent.

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