The Star Online: World Updates
The Star Online: World Updates |
- IMF warns global economic slowdown deepens, prods U.S., Europe
- Isolated North Korea says its rockets can hit U.S. mainland
- IMF cuts global growth forecast; prods Europe, U.S
| IMF warns global economic slowdown deepens, prods U.S., Europe Posted: 08 Oct 2012 08:48 PM PDT TOKYO (Reuters) - The IMF said the global economic slowdown is worsening as it cut its growth forecasts for the second time since April and warned U.S. and European policymakers that failure to fix their economic ills would prolong the slump.
Global growth in advanced economies is too weak to bring down unemployment and what little momentum exists is coming primarily from central banks, the International Monetary Fund said in its World Economic Outlook, released ahead of its twice-yearly meeting, which will be held in Tokyo later this week. "A key issue is whether the global economy is just hitting another bout of turbulence in what was always expected to be a slow and bumpy recovery or whether the current slowdown has a more lasting component," it said. "The answer depends on whether European and U.S. policymakers deal proactively with their major short-term economic challenges." Ahead of the Tokyo meeting, policymakers have flagged the U.S. "fiscal cliff" -- government spending cuts and tax raises due to take affect early in 2013 -- and resolving the euro area's debt crisis as the top issues facing the global economy. Europe's debt crisis is "a clear and present danger", Canadian Finance Minister Jim Flaherty said last week. The IMF forecast in its latest health check on the world economy that global output in 2012 would grow just 3.3 percent, down from a July estimate of 3.5 percent. That would make this the slowest year of growth since 2009 when the world was struggling to pull out of the global financial crisis. It predicted only a modest pickup next year to 3.6 percent, below its July estimate of 3.9 percent. It projected U.S. growth would be a little more than 2 percent this year and next, but forecast a contraction in the euro area this year by 0.4 percent and modest growth in 2013 of 0.2 percent. Emerging markets are still expected to grow four times as fast as advanced economies, but the IMF took a sharp knife to its estimates for India and Brazil, with the latter now seen growing slower than the United States this year. It also cut its expectations for China in 2012 and 2013 but warned against being overly pessimistic about the prospects of these economies, which were major engines of growth in the global financial crisis. "Let me be clear. We do not see these developments as signs of a hard landing in any of these countries," IMF Chief Economist Olivier Blanchard said at a briefing, referring to China, India and Brazil. MORE AT WORK The IMF said "familiar" forces were dragging down advanced economy growth: fiscal consolidation and a still-weak financial system, the same problems that have plagued the world since the global financial crisis exploded in 2008. "More seems to be at work, however, than these mechanical forces - namely, a general feeling of uncertainty," Blanchard said in a commentary on the forecasts. Measures of risk and uncertainty, such as the VIX volatility gauge in the United States, remain at low levels, Blanchard pointed out, which makes it difficult to assess the nature of the uncertainty. "Worries about the ability of European policymakers to control the euro crisis and worries about the failure to date of U.S. policymakers to agree on a fiscal plan surely play an important role, but one that is hard to nail down," Blanchard said. Concerns about the health of the global economy and corporate earnings prospects have weighed on financial markets. World shares as measured by the MSCI world equity index fell 0.7 percent on Monday. The index was flat in Asia on Tuesday. S&P 500 earnings for the third quarter are forecast to have fallen more than 2 percent from the year-earlier period, which would be the first decline in three years, Thomson Reuters data shows. The IMF said financial conditions are likely to remain "very fragile" over the near term because repairing euro zone problems will take time and there are concerns about how the U.S. economy will cope with the expected spending cuts and tax increases. The "urgent policy priorities" for the United States should include avoiding the fiscal cliff, which the IMF said at the extreme would amount to a fiscal withdrawal of more than 4 percent of GDP in 2013, and economic growth would stall. "Both sides of the political isle (should) signal that they are willing to compromise and that they're willing to get this done ... that could help lower the level of uncertainty that is affecting U.S. investors and consumers," IMF First Deputy Managing Director David Lipton told Reuters in an interview on Monday. Resolving the euro area crisis would require progress in adopting and implementing the various measures discussed, including banking and fiscal union, the IMF report said. "If the complex puzzle can be rapidly completed, one can reasonably hope that the worst might be behind us," Blanchard said. Euro zone finance ministers on Monday unveiled the European Stability Mechanism (ESM), a 500 billion euro rescue mechanism for lending to distressed economies in the 17-country bloc. But perhaps the biggest contagion risk for the region is Spain, which a British finance ministry source suggested will be the top issue for finance ministers in Tokyo. "We have always been very clear that the euro zone needs to take significant action," the source said. The euro zone has already set aside 100 billion euros for Spain to recapitalise its banks but financial markets believe a government bailout will follow in coming weeks or months. (Additional reporting by Anna Yukhananov in TOKYO and David Milliken in LONDON; Editing by Neil Fullick)
Copyright © 2012 Reuters | ||
| Isolated North Korea says its rockets can hit U.S. mainland Posted: 08 Oct 2012 08:04 PM PDT SEOUL (Reuters) - Isolated North Korea has rockets that can hit the U.S. mainland, it said on Tuesday, two days after South Korea struck a deal with the United States to extend the range of its ballistic missiles. North and South Korea have been technically at war since their 1950-53 conflict ended in a truce, not a peace treaty, and regional powers have for years been trying to rein in the North's nuclear weapons programme. North Korea is believed to be developing a long-range missile with a range of 6,700 km (4,160) miles) or more aimed at hitting the United States, but two recent rocket tests both failed. Its neighbours fear the North is using rocket launches to perfect technology to build a missile capable of delivering a nuclear warhead to the United States. North Korea's National Defence Commission said in a statement that the North was prepared to counter any U.S. military threats, its KCNA news agency said. "We do not hide (the fact) that the revolutionary armed forces ... including the strategic rocket forces are keeping within the scope of strike not only the bases of the puppet forces and the U.S. imperialist aggression forces' bases in the inviolable land of Korea, but also Japan, Guam and the U.S. mainland," KCNA said. South Korea on Sunday unveiled an agreement with the United States that extends the range of its ballistic missiles by more than twice its current limit to 800 km (497 miles) as a deterrent against the North. North Korea is under heavy U.N. sanctions that have cut off its previously lucrative arms trade and further isolated the state after its failed 2009 missile test drew sharp rebukes, even from its one major ally, China. The United States has denied it has any intention to strike North Korea. It has more than 20,000 troops stationed in the South in defence of its ally against the North. In April, under its new leader Kim Jong-un, North Korea again launched a rocket that flew just a few minutes covering a little over 100 km (60 miles) before blowing up over the sea between South Korea and China. (Reporting by Jack Kim; Editing by Nick Macfie) Copyright © 2012 Reuters | ||
| IMF cuts global growth forecast; prods Europe, U.S Posted: 08 Oct 2012 07:20 PM PDT TOKYO (Reuters) - The IMF cut its global growth forecast on Tuesday for the second time since April and warned U.S. and European policymakers that failure to fix their economic ills would prolong the slump.
Global growth is too weak to bring down unemployment and what little momentum exists is coming primarily from central banks, the International Monetary Fund said in its World Economic Outlook, released ahead of its twice-yearly meeting, which will be held in Tokyo later this week. "A key issue is whether the global economy is just hitting another bout of turbulence in what was always expected to be a slow and bumpy recovery or whether the current slowdown has a more lasting component," it said. "The answer depends on whether European and U.S. policymakers deal proactively with their major short-term economic challenges." For 2012, the IMF now expects global output to grow just 3.3 percent, down from its July estimate of 3.5 percent, making it the slowest year of growth since 2009. It predicted only a modest pickup next year to 3.6 percent, below its July estimate of 3.9 percent. Emerging markets are still expected to grow four times as fast as advanced economies, but the IMF took a sharp knife to its estimates for India and Brazil, with the latter now seen growing slower than the United States this year. The IMF said "familiar" forces were dragging down advanced economy growth: fiscal consolidation and a still-weak financial system, the same problems that have plagued the world since the global financial crisis exploded in 2008. "More seems to be at work, however, than these mechanical forces - namely, a general feeling of uncertainty," IMF Chief Economist Olivier Blanchard said. Measures of risk and uncertainty, such as the VIX volatility gauge in the United States, remain at low levels, Blanchard pointed out, which makes it difficult to assess the nature of the uncertainty. Blanchard described it as "more Knightian in nature," referring to a term for risk that is impossible to measure, named after economist Frank Knight. "Worries about the ability of European policymakers to control the euro crisis and worries about the failure to date of U.S. policymakers to agree on a fiscal plan surely play an important role, but one that is hard to nail down," Blanchard said. The IMF said financial conditions are likely to remain "very fragile" over the near term because repairing euro zone problems will take time and there are concerns about how the U.S. economy will cope with the expected expiry of tax cuts early next year. For the United States, the IMF said its "urgent policy priorities" should include avoiding a so-called "fiscal cliff" from the expected tax increases and spending cuts, raising the government borrowing limit, and agreeing on a credible plan to reduce the deficit. It said the fiscal cliff at the extreme would amount to a fiscal withdrawal of more than 4 percent of GDP in 2013, and economic growth would stall. In the euro area, it said resolving the crisis was the highest priority, and that would require progress toward banking and fiscal union. "If uncertainty is indeed behind the current slowdown, and if the adoption and implementation of these measures decrease uncertainty, things may turn out better than our forecasts, not only in Europe, but also for the rest of the world," Blanchard said. "I, for once, would be happy if our baseline forecasts turn out to be inaccurate - in this case, too pessimistic." (Editing by Tomasz Janowski)
Copyright © 2012 Reuters |
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