WASHINGTON: The International Monetary Fund (IMF) expressed guarded optimism about the state of the global economy on Tuesday, even as it trimmed its forecasts for output and warned about the catastrophic impact of a US debt default.
In its latest global economic snapshot, the IMF cut its world growth forecasts for the sixth straight time in less than two years, saying a stronger performance in most advanced economies would fail to make up for a more sluggish expansion in the developing world.
Prospects for emerging markets, long the engine of the global recovery, have dimmed somewhat with both structural and cyclical factors at play, the IMF said.
The IMF now expects global output to expand just 2.9 per cent this year, down from its July estimate of 3.1 per cent, making it the slowest year of growth since 2009. It sees a modest pickup next year to 3.6 per cent.
"Although the global growth number is not impressive, I think the news on net is rather good. Those countries which were sick are less sick than they were," the IMF's chief economist Olivier Blanchard said, referring to rich nations.
"And the others are slowing down, but I wouldn't call this sickness," he said in a reference to emerging markets.
The US is driving much of the global recovery and US output should pick up further next year - as long as politics do not get in the way, the IMF said.
Blanchard warned that a failure by the US Congress to quickly raise the nation's US$16.7 trillion (RM53.37 trillion) debt ceiling could tip the world's largest economy into a deep downturn that would be felt around the globe.
"The effects of any failure to repay the debt would be felt right away, leading to potentially major disruptions in financial markets," he said. "It could well be that what is now a (US) recovery would turn into a recession or even worse." He said, however, that such an event did not appear likely.
The IMF forecasts showed emerging markets still accounting for much of global growth, with their economies forecast to expand nearly four times as fast this year as advanced economies. Reuters