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IMF raises outlook for global, U.S. economies

Published: Tuesday, Jan. 21, 2014 5:39 p.m. CDT • Updated: Saturday, Jan. 25, 2014 12:34 p.m. CDT

WASHINGTON – The International Monetary Fund is slightly more optimistic about the global and U.S. economies this year than it was three months ago.

In an updated outlook released Tuesday, the global lending organization forecasts the world economy will grow 3.7 percent in 2014 and that the U.S. economy will grow 2.8 percent. The global forecast is 0.1 percentage point higher and the U.S. forecast 0.2 point higher than the IMF’s October forecast.

After a sluggish start, global economic growth picked up in the second half of 2013. As a result, growth amounted to 3 percent last year. The IMF expects it will be even stronger growth this year.

“The recovery is indeed strengthening, but as we have said many times in the past, much work remains to be done,” IMF chief economist Olivier Blanchard said Tuesday during a conference call.

The IMF forecasts the U.S. economy grew 1.9 percent last year. And its 2.8 percent forecast for this year would match U.S. growth in 2012. Part of the anticipated improvement is based on expectations for less drag from higher U.S. taxes and across-the-board spending cuts.

By 2015, the IMF forecast the U.S. economy will grow 3 percent, or 0.4 percentage point lower than its October forecast. The IMF reduced its outlook because a recent budget agreement left in place most of the spending cuts. The IMF had expected most of those cuts to have been eliminated by next year.

For the countries in Europe using the common euro currency, the IMF forecasts stronger growth. The region is emerging from recession after a lingering debt crisis.

Economic activity shrank 0.7 percent in 2012 and 0.4 percent in 2013. But this year the IMF projects 1 percent growth and 1.4 percent in 2015.

Germany, the biggest economy in Europe, will grow 1.6 percent this year it projects, up from 0.5 percent growth in 2013.

China is expected to grow 7.5 percent in 2014 and 7.3 percent in 2015. Both 2014 and 2015 projections were slightly higher than the IMF’s October forecast, but lower than the 7.7 percent growth reported for 2013.

The IMF said that growth in China, the world’s second-largest economy, had rebounded strongly in the second half of 2013 due to acceleration in investment. But the IMF said the growth will moderate because of actions by the government to slow growth in credit.

For Japan, the IMF forecast growth of 1.7 percent this year, the same as 2013, but a slowdown to 1 percent growth in 2015.

The IMF said that the United States and other major economies should be careful not to pull back prematurely on the economic support being provided by the Federal Reserve and other central banks. That’s because unemployment in many countries remains high and inflation is low.

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