IMF Cuts Global Outlook

Fund also warns that a U.S. government default could ‘seriously damage’ world economy.

The International Monetary Fund cut its global outlook for this year and next as capital outflows further weaken emerging markets and warned that a U.S. government default could “seriously damage” the world economy.

Growth worldwide will be 2.9 percent this year and 3.6 percent next year, the IMF said in a report released today in Washington, compared with July predictions of 3.1 percent for 2013 and 3.8 percent for 2014. It sees emerging economies growing 4.5 percent this year, 0.5 percentage point less than three months ago, as projections were reduced for China, Mexico, India and Russia.

Clear Communication

“This change could pose risks for emerging-market economies, where activity is slowing and asset quality weakening,” the IMF wrote in the report. “Careful policy implementation and clear communication on the part of the Federal Reserve will be essential.”

ECB’s Policy

The euro-area’s central bank should also consider giving additional monetary support through lower interest rates, forward guidance on future rates or negative deposit rates, it said.

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