THE INTERNATIONAL MONETARY Fund (IMF) has cut its global growth forecast for this year and next and warned that government policies have failed to restore confidence.
In its latest World Economic Outlook published today, the Washington-based organisation says that that the global economy will grow by 3.3 per cent this year, down from its July estimate of 3.5 per cent.
It predicts that Ireland’s economy will be one of only a few in the eurozone to post growth this year and acknowledges the country’s “bumpy recovery”.
Global economic growth will only hit 3.6 per cent next year which is lower than the 3.9 per cent predicted in July.
However both of these forecasts are based on the assumption that European leaders get a handle on the crisis afflicting countries like Spain and that politicians in the US reach a deal that will avoid harsh spending cuts and taxes that automatically kick-in in January to deal with its spiralling deficit.
The IMF says: “The most immediate downside risk — that delayed or insufficient policy action will further escalate the euro area crisis — remains in place.
It adds: “In the United States, it is imperative to avoid excessive fiscal consolidation (the fiscal cliff) in 2013, to raise the debt ceiling promptly, and to agree on a credible medium-term fiscal consolidation plan.”
For Ireland, the IMF says that it expects it to be the only bailed out eurozone country that will post growth this year but acknowledged that it is a “bumpy recovery”.
“Except for Ireland, which is in a bumpy recovery, the recessions in the economies of the euro area periphery have been deeper, and recovery is generally expected to begin only in 2013, once adjustment moderates,” the Fund says.
Gross Domestic Product (GDP) in Ireland will grow by 0.4 per cent this year and 1.4 per cent next year, the IMF says, with unemployment expected to come at around 14.8 per cent this year.
This will fall only moderately to 14.4 per cent next year – the same rate that it was in 2011.
In its more detailed assessment of Ireland’s finances under the bailout programme with European authorities, the Fund has consistently said that joblessness is too high in this country.
However the slight fall in Ireland’s unemployment figures compares favourably to that of other bailed out nations.
In Greece unemployment will rise to over 25 per cent next year while in Portugal it will rise to 16 per cent next year, according to the IMF.