miércoles, 10 de julio de 2013

miércoles, julio 10, 2013

ECONOMY

Updated July 9, 2013, 12:17 p.m. ET

IMF Cuts Global Growth Outlook

Prospect of the U.S. Fed Unwinding Easy-Money Policies Is Aggravating Emerging-Markets Slowdown

By  IAN TALLEY
 
     WASHINGTONThe International Monetary Fund Tuesday cut its global growth outlook for this year and next, saying the prospect of the U.S. Federal Reserve unwinding its easy-money policies is aggravating a slowdown in emerging markets.
     
    The IMF's souring emerging-market forecast comes on top of a deepening euro-zone contraction and a downward revisión of U.S. growth as federal-budget cuts bite longer than the fund originally forecast.
     
    The IMF cut its growth forecast for this year and next by 0.2 percentage point from its last assessment in April. It now expects 2013 growth at 3.1% and 2014 output at 3.8%.
     

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    The IMF said downside risks to global growth prospects still dominate. "While old risks remain, new risks have emerged, including the possibility of a longer growth slowdown in emerging market economies," the IMF said in an update of its World Economic Outlook.
     
    Countries such as China, Brazil and India are facing lower potential growth, slowing credit and tighter financial conditions as investors consider pulling their cash out of emerging markets in favor of higher returns in the U.S., where interest rates are rising. The fund downgraded emerging-market-growth expectations by 0.3 percentage point, forecasting 5% output this year and 5.4% in 2014. Brazil, China and Russia were hit with some of the largest growth cuts.
     
    The Fed sparked a torrent of capital-flow reversals last month as officials outlined a possible exit plan from the bank's cheap cash policies. The prospect of higher interest rates caused investors to restructure their portfolios, stoking volatility in currency, bond and equity markets around the globe.
     
    The IMF hopes those market gyrations will cool. "They largely reflect a one-time repricing of risk due to the changing growth outlook for emerging market economies and temporary uncertainty about the exit from monetary policy stimulus in the U.S.," the fund said.
     
    But it cautioned that underlying vulnerabilities in emerging markets could lead to more portfolio shifts, particularly if interest rates continue to rise. "The results could be sustained capital-flow reversals and lower growth in emerging markets."
     
    Top fund officials have recently criticized the Fed for not communicating clearly enough about its exit plans. The IMF, which acts as the world's emergency lender and economic counselor, said the U.S. central bank should keep its $85 billion-a-month cash injections going until at least the end of the year, and only slightly let up on the easy-money accelerator in early 2014.
     
    The slowing growth and capital outflows put emerging-market policy makers in a tough spot. Weaker output should call for easy-money policies. But lower interest rates won't help authorities stem a flow of investment out of their economies that can deflate currencies and collapse markets.
     
    With weaker growth prospects and potentially overinflated markets, emerging markets face the threat of financial instability, the IMF warned. For example, many economists warn that China's real-estate market could crash after years of hyper-investment.
     
    Meanwhile, the euro zone faces a worsening contraction. The IMF says the currency union is now expected to contract this year by 0.6% before a 0.9% rebound next year. Monday, the fund urged the European Central Bank to cut policy rates and use other tools to spur lending.
     
    The IMF also downgraded U.S. growth prospects as it now expects automatic federal budget cuts won't be replaced with a more-gradual pace of deficit reduction. The fund sees the U.S. economy expanding at 1.7% this year and 2.7% next year.
     
    Two bright spots in the report are higher growth rates for Japan and the U.K. The Bank of Japan's 8301.JA 0.00% aggressive easing efforts pushed the Asian economy's forecast up by half a percentage point this year to 2%. And although the IMF earlier this year criticized London's austere approach to its government balance sheet, those policies have helped advance the U.K.'s growth outlook up to 0.9% this year.


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