imf

The IMF more than halved its projection for economic growth in the
euro zone this year and shaved its forecast for the UK, at the same time as boosting its
estimate for the US, according to a report in the Financial Times.
The revised projections are included in leaked drafts of the IMF's upcoming World
Economic Outlook (WEO), the FT said. The WEO is a semi-annual report, with the next issue
due for release in September, at the time of the annual IMF meetings.
The euro area can expect GDP growth of just 0.5 pct this year, rather than the 1.1
pct forecast by the IMF in the last WEO in April. This compares with a growth forecast of
2.3 pct by the IMF last September.
The forecasts will take account of Q2 GDP figures, which showed most euro zone
economies contracting; Germany has now registered three straight quarters of shrinking
GDP.
The UK's prospects have also dimmed, with the IMF forecasting 1.7 pct growth in 2003,
down from 2.0 pct in the April estimate. In 2004, the IMF sees the UK economy growing 2.4
pct, a notch below the 2.5 pct forecast last time.
This compares with the UK Treasury's forecasts of 2.0-2.5 pct growth this year, and a
3.0-3.5 pct expansion next year.
Growth projections for the US were boosted to 2.4 pct this year and 3.7 pct next
year. This compares with 2.2 pct and 3.6 pct growth forecasts in April.
Overall world GDP growth is pegged at 3.2 pct this year, unchanged from April, and
4.0 pct next year, also unchanged, according to the FT.
In a separate story, the Guardian newspaper had slightly different revisions to the
IMF's forecasts, although the discrepancy is minor.
For the UK, growth is seen at 1.8 pct this year and 2.3 pct next. For the US, growth
is forecast at 2.2 pct this year and 3.6 pct next year. Euro zone growth is put at 0.7
pct in 2003, according to the Guardian.
Japan is expected to grow 1.1 pct this year, better than the 0.8 pct forecast in
April, the Guardian said.
The IMF also forecasts German GDP growth of zero for this year, down from 0.5 pct in
April, with France and Italy seen expanding 0.8 pct, according to the reports.
The revisions bring the IMF's forecasts closer in line with private sector
economists, who have grown increasingly bullish on the US economy, yet remain cautious
about Europe's prospects.
The 2.4 pct US GDP growth rate for the second quarter served as a notable surprise to
markets. The figure is expected to be revised up later today when the US releases its
second estimate for Q2 GDP -- to 2.9 pct.
With industrial production now expanding, and housing and consumer spending growth
apace, some private sector economists have also upgraded their estimates for the US in
the second half.
On Tuesday, HSBC economists boosted their Q3 US GDP growth forecast from 2.4 pct to
4.5 pct, and Q4 growth from 1.5 pct to 2.0 pct.
The US government forecasts more than 4.0 pct GDP growth for the US next year.
Drafts of the IMF's upcoming WEO also highlight IMF concerns about the enormous US
fiscal deficit, the FT said.
The US Congressional Budget Office roughly doubled its forecasts for the federal
budget gap for 2003 and 2004 taken together, with a combined deficit of 881 bln usd seen
in the two years.