IMF slashes global growth forecast

The International Monetary Fund has cut its global growth forecasts for this year and 2013 and called on politicians in the eurozone and the US to take "decisive" steps to restore confidence, a German newspaper said Friday. Citing excerpts from the IMF's World Economic Outlook to be released early next week, the Handelsblatt business daily said that the Washington-based body predicted world economic growth of 3.3 percent in 2012 and 3.6 percent in 2013. In July, the IMF issued forecasts of 3.5 percent and 3.9 percent, respectively. The German-language paper quoted the report as saying that the "further cooling of growth in the world economy this year and next goes along with a clear increase in downward risks." The forecast depends in particular on "whether decisive political steps are taken in the eurozone and the US to stabilise confidence," the paper quoted the report as saying. The IMF forecasts a shrinking of the eurozone economy of 0.4 percent this year and a small positive growth of 0.2 percent in 2013. The IMF cut its forecast for China to 8.2 percent, for India to six percent and for Brazil to four percent, according to Handelsblatt. The fund also saw a "further drop in inflation" given the sluggish global economic output and recommended additional cuts in interest rates to stimulate activity. Three leading European economic institutes have estimated meanwhile that the eurozone economy will remain in recession until the end of this year. The French institute INSEE and its German and Italian counterparts IFO and ISTAT forecast a contraction in business activity of 0.2 percent in the third quarter, they said in a joint statement. That is the same rate of decline as in the second quarter of the year. A further contraction of 0.1 percent in the last three months would be followed by zero growth in the first quarter of 2013, the institutes said. Eurozone domestic demand is being undermined by economic uncertainty and the impact of budget consolidation across the 17-nation bloc, the three institutes added.