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Wednesday, Oct. 10, 2012

Euro, trade woes sour IMF forecasts

Japan also seen sliding as disaster rebuilding wanes, politics stumble

Staff writer

The annual meeting of the International Monetary Fund and World Bank kicked off Tuesday in Tokyo with a somber assessment of the global economy by the IMF, which cut its growth forecast, citing uncertainties in Europe and in emerging economies, including China.

News photo
No sugar-coating: Olivier Blanchard, chief economist at the International Monetary Fund, faces reporters Tuesday in Tokyo. AFP-JIJI

Japan was also singled out for its slump as the reconstruction efforts from the March 2011 earthquake and tsunami wane.

"The global economic recovery continues but it has weakened further," IMF chief economist Olivier Blanchard said at a press briefing to open the six-day meeting.

In its quarterly update of the World Economic Outlook, released just ahead of the annual gathering, the IMF cut the global growth prediction from the 3.5 percent that was forecast in July to 3.3 percent. The organization also dropped its 2013 prediction from 3.9 percent to 3.6 percent.

"Downward revisions are widespread," Blanchard said, but he added they are stronger for the euro countries and the emerging markets of China, India and Brazil.

The IMF revised Japan's economic outlook downward, saying the impact of reconstruction activity related to the 2011 disasters will fade and growth is projected to fall from 2.2 percent this year to 1.2 percent in 2013, down from the July forecasts of 2.4 percent and 1.5 percent.

On the state of advanced countries, the IMF economist said a still weak financial system continues to pull their growth down.

"Worries about the ability of European policymakers to control the euro crisis, worries about the failure of U.S. policymakers to agree so far on a fiscal plan, worries about the ability of Japanese policymakers to reduce their budget deficit," are cause for a "general feeling of uncertainty about the future," Blanchard said.

Sluggish growth in advanced countries will continue to contribute to the slowdown in emerging economies, he said, noting China has been hit by falling exports.

Countries should continue accommodative monetary policy and "limit the adverse effects of the brakes," Blanchard advised.

The IMF-World Bank annual gathering brings together finance ministers and central bank governors from 188 countries. Japan last hosted the event in 1964.

"We are hoping that countries will work hand in hand to tackle issues, share a close understanding of each other and come up with new prospects on economic and financial problems," Finance Minister Koriki Jojima said.

A two-day dialogue on disaster prevention also began Tuesday in Sendai, where reconstruction efforts from the March 2011 disasters continue. IMF Managing Director Christine Lagarde and World Bank President Jim Yong Kim are scheduled to visit the Tohoku region's devastated coast Wednesday.

Japan is looking forward to sharing lessons about disaster prevention, Jojima said.

The annual meetings of the IMF and World Bank are expected to bring together nearly 20,000 government and private-sector officials and central bankers to discuss issues ranging from the eurozone crisis and the slowing global economy to support for developing nations.

The Conference of Finance Ministers and Central Bank Governors of the Group of Seven takes place Thursday on the sidelines of the IMF-World Bank gathering.

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The Japan Times

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