IMF revises up global economic growth to 3.5% on easing concerns

The International Monetary Fund raised its growth outlook for the world economy to 3.5 percent this year, reflecting the improving economic data for the United States and the softened concerns about the eurozone fiscal debt crisis.

In the latest World Economic Outlook, the IMF said the sense of crisis has been eased to some extent. But it warned that the pace of the economic growth in emerging markets is slower than expected and worries over the eurozone problem continue, placing downside risks on the global economy.

In its previous outlook in April, the global economic growth was forecast to stand at 3.3 percent for 2012.

The IMF said the Korean economy would grow 3.5 percent for 2012 and 4.0 percent for 2013. The country’s inflation growth is forecast to reach 3.4 percent this year and 3.2 percent next year.

“In Korea, a rebound in construction is expected to offset a muted outlook for private consumption and investment due to increased global uncertainty,” the IMF said in the report.

Despite the improved outlook, the IMF stressed that the global economy is still “fragile” as Europe is faced with a mild recession due to the troubled financial market and austerity measures.

The 2012 growth outlook for the U.S. has been revised up to 2.1 percent, versus an earlier estimate of 1.8 percent.

As for the emerging market, the IMF said China would take the lead with an annual growth rate of 8.2 percent, slightly up from the January projection of 8.1 percent.

The report said the eurozone members have taken policy measures to contain the crisis and the risks have been reduced as a result. But it warned that there are still major downside risks, which could revive the flare-up of a crisis for the region unless the key issues are tackled properly with additional policy measures.

Higher oil prices stemming from geopolitical risks in the Middle East are also feared to hurt the growth rate of the world economy, the report said. If oil prices go up by 50 percent from the current level, global economic growth would tumble by as much as 1.25 percent over the next two years, according to the report.

The Washington-based IMF recommended that advanced nations should keep accommodative monetary policy and keep pumping liquidity to household and financial sectors.

Emerging economies should refrain from excessive market-boosting measures as there are concerns about overheating. Instead, emerging countries are required to manage credit increases, capital flows and normalization of currency policies, the report said.

By Yang Sung-jin (insight@heraldcorp.com)