IMF cuts global economic forecast to 3.1 percent

The International Monetary Fund said Tuesday that it has revised down its global economic forecast to 3.1 percent this year and 3.8 percent next year.

Both of these projections are a 0.2 percentage point cut from its initial estimations, the IMF said.

The eurozone’s prolonged debt crisis, a slowdown in emerging economies and spending cuts in the U.S. were the reasons for the growth forecast revision, the IMF explained.

The U.S., the world’s largest economy, is projected to grow 1.7 percent this year, down 0.2 percentage point from the IMF’s forecast last April.

A further contraction of 0.6 percent is expected for the eurozone economy this year.

The IMF, meanwhile, forecast Japan, the world’s third-largest economy, to grow 2 percent this year, up 0.5 percentage point from its April projections.

Emerging markets’ growth has been slashed by 0.3 percentage point to 5 percent in 2013.

China, Korea’s biggest trading partner, is projected to grow 7.8 percent this year, down 0.3 percentage point.

Koreas was not included in the IMF’s World Economic Outlook report on Tuesday.

Last April, the IMF revised down Korea’s growth forecast to 2.8 percent this year, from the 3.2 percent it estimated earlier this year.

It expected Korea’s economy to progress toward the trend of 4 percent next year, when it would grow 3.9 percent on the back of improvements in exports and increased private investment.

Last month, Korea’s Ministry of Strategy and Finance revised its annual growth projection to 2.7 percent this year. It said the country would be able to hit the mark through a “policy mix” of fiscal and monetary stimulus.

The Finance Ministry changed its growth forecast from its initial “baseline” estimate of 2.3 percent early this year. Korea is expected to see 3 percent growth in the second half of this year. Its target for 2014 is a return to 4 percent growth.

Fiscal spending, housing revitalization and investment promotion measures are expected to fuel growth, while the Bank of Korea’s rate cut and increased credit facilitation for small and medium enterprises in May will further boost the economy, it explained.

By Park Hyong-ki
(hkp@heraldcorp.com)