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The big picture view of an ever-changing global economy.

IMF cuts global growth forecast

Merde! The International Monetary Fund warns of more trouble ahead. Thanks, Europe.
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Here comes the darkness. Again. (Mario Tama/AFP/Getty Images)

When it comes to the global economy, yes, we're all connected.

That's the underlying message from the International Monetary Fund today, which said that the ongoing trouble in Europe will lead to lower economic growth in emerging market stars like China, India and Brazil.

Those countries, of course, do a lot of business with the struggling euro zone.

Their high rates of growth also tend to help the overall global economy, particularly when more developed economies like the US, Europe and Japan are struggling.

As a result of those two factors, the IMF on Monday cut its global growth forecast for 2013 to 3.9 percent.

In April, it predicted that world economic output would grow by 4.1 percent.

The Washington, DC-based organization also lowered its 2012 growth forecast to 3.5 percent, down from the 3.6 percent growth rate it was predicting back in April.

And things might get even worse.

The money quote from the report was aimed squarely at policymakers in Brussels, Frankfurt and Berlin:

"Downside risks to this weaker global outlook continue to loom large. The most immediate risk is still that delayed or insufficient policy action will further escalate the euro area crisis. In this regard, agreements reached at the EU leaders' summit are steps in the right direction. But further steps are needed, notwithstanding high implementation hurdles, as underscored by the very recent deterioration in sovereign debt markets. The situation in the euro area crisis economies will likely remain precarious until all policy action needed for a resolution of the crisis has been taken."

The IMF also said the United States — the world's largest economy — is another risk to the rest of the planet, warning that political gridlock in Washington, DC could force the US economy to "stall" next year.

The one bright spot is Africa, where growth is expected to hit 5.4 percent this year, and 5.3 percent in 2013 — largely thanks to domestic demand.

Sometimes, it's good not to be connected. 

http://www.globalpost.com/dispatches/globalpost-blogs/macro/imf-cuts-global-growth-forecast