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IMF spring meetings conclude amid improving but uneven global economic recovery
The International Monetary Fund (IMF) wrapped up its annual spring meetings Saturday amid an improving but uneven global economic recovery.
"The global economy is faring better. (But) it's uneven, it's too slow, it's too fragile," IMF Managing Director Christine Lagarde told reporters at a press conference Saturday.
The Fund said earlier this week that the global recovery will gain strength this year, but cut its growth forecast somewhat on a slowdown in emerging markets.
While advanced economies have gained steam, recovery worldwide continues to be uneven and subpar, the IMF said, adding that risks include low inflation and uncertainty in countries undergoing political turmoil.
Still, a slowly strengthening U.S. economy will help the world economy grow 3.6 percent in 2014, up sharply from 3 percent last year but down slightly from earlier projections of 3.7 percent, according to IMF figures released this week.
Growth has turned positive in the Eurozone, and Japan's economic activity is expected to get a boost from private investment and exports. But overall economic activity in Japan is projected to slow moderately in response to a tightening fiscal policy stance in 2014-2015, the IMF said.
While growth is moving in the right general direction, investment remains weak across all regions, Tharman Shanmugaratnam, chairman of IMF's International Monetary and Financial Committee, told reporters during the same press conference.
"Investment is still weak relatively to where it should be in this stage of the recovery. Everywhere. In the emerging world as well as the advanced world, including the United States," he said.
Asia Sees Most Dynamic Growth
Asia was by far the biggest success story for this year's IMF spring meetings, although growth varies from country to country.
"We believe the Asia Pacific Region will continue to remain the most dynamic in the global world, although the growth rate in 2014 will not be as stellar as it was a few years ago," Changyong Rhee, the director of the Asia and Pacific Department with the IMF, told reporters Friday. "But the region is well-positioned to capitalize on the recovery of advanced economies, and the growth momentum will continue."
"(The) main driver of this growth is definitely an improvement of external demand due to the recovery of the advanced economies," he said.
Asian economies will grow 5.4 percent this year and 5.5 percent next year, edging slightly upwards from 5.2 percent in 2013.
China is expected to grow at around 7.5 percent in 2014, lower than last year's 7.7 percent, but "(that) should be regarded as a desirable adjustment to a more sustainable growth path," Rhee said.
With the Asian giant's current transformation from an export- based economy to one with more consumer spending, American Enterprise Institute resident fellow Desmond Lachman told Xinhua believed that a more balanced Chinese economy would make the country's impressive growth performance more sustainable.
If present trends continue, the world's second largest economy could surpass the U.S. economy in size by around 2020, Lachman told Xinhua.
"However, since China's consumption is less than 50 percent of GDP while the U.S. ratio is 70 percent, it would probably only be by around 2025 that China's consumption could be more important than that in the U.S.," he said. Barry Bosworth, senior fellow at the Brookings Institution, told Xinhua that China will eventually replace the U.S. as the world's biggest consumer economy, but that will take a couple of decades. Much depends on whether China can successfully promote the growth of a middle class and the consumption that goes with it, he said.
Japan will see 1.4 percent growth this year, and India will lead South Asia with a growth rate increase to 5.4 percent. Economic growth in the Association of the Southeast Asian Nations will reach 5 percent in 2014, according to the IMF projections.
There are some risks, Rhee said, including the impact that sharper-than-expected quantitative easing tapering can have on Asian economies. While there can be positive impacts, a " disorderly and unexpectedly tightening of monetary policy may have a negative impact in Asia through the capital outflows from the region and increased borrowing costs," Rhee said.
Frontier economies such as Myanmar and Cambodia will continue to catch up, and their growth rates will be 7.8 percent and 7.2 percent, respectively, Rhee said.
U.S. Growth to Pick Up
The U.S. economy is picking up, and is expected to grow 2.8 percent this year, the IMF said, although economists outside the IMF note the growth ratio is not enough to get millions of jobless Americans back to work.
"For the most part, the brakes are gone" in the U.S., IMF chief economist Olivier Blanchard said. "The U.S. recovery is the strongest among advanced economies and therefore in a way it's pulling the world."
The Fund expects good news for the U.S. in 2015, with a growth projection of 3.9 percent, the IMF announced earlier this week.
Lachman said underlying growth conditions in the U.S. seem to be favorable, especially in the energy and housing sectors of the economy. Unlike in 2013, the U.S. economy in 2014 and 2015 will not be facing very strong headwinds.
However, Lachman said it is unlikely that the U.S. will grow on a sustained basis by more than 3 percent a year. As such, the rest of the world will not be able to rely on the old role of the U.S. as the locomotive for the world's economic growth.
"It would seem that each of the major economic blocs would need to generate their own growth,"he said.
Moreover, it remains unclear whether U.S. growth will translate into jobs growth, as recent economic gains have not put a significant dent in the U.S. jobless rate.
Millions of Americans remain unemployed, and the long-term unemployed -- the number of those jobless for 27 weeks or more -- stands at a staggering 3.7 million, accounting for 35.8 percent of the total number of unemployed individuals, according to the U.S. Labor Department.
[Source: By Matthew Rusling, Xinhua, Washington, 12Apr14]
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