17 Jul 2012

Global economic recovery still at risk - IMF

6:06 am on 17 July 2012

The International Monetary Fund says the global economic recovery is still at risk and eurozone economies remain in a precarious situation.

The IMF has downgraded its forecast for global growth for 2013 to 3.9% from a prediction of 4.1% made in April.

In an update of its World Economic Outlook, the agency said:

''Downside risks continue to loom large, importantly reflecting risks of delayed or insufficient policy action.''

Overall, the IMF now predicts that growth in advanced economies is projected to expand by 1.4% this year and 1.9% the following year.

The report said the eurozone will remain in a "precarious" situation unless further action is taken to avoid the sovereign debt crisis from escalating and prevent a market meltdown.

''The utmost priority is to resolve the crisis in the euro area,'' said the report.

The eurozone economy is expected to contract by 0.3% this year before rebounding by 0.7% next year.

The IMF also called on the European Central Bank to use more unorthodox monetary tools, such as providing banks in the region with additional unlimited loans or long-term refinancing operations.

On Thursday, the ECB set its main lending rate below 1% for the first time, at 0.75%.

The BBC reports one of the rare bright spots for the global economy is inflation, which is expected to ease as demand and commodity prices, including oil, weaken.