Tags: IMF | risks | Global | Growth

IMF Official: Risks to Global Growth Are Rising

Thursday, 05 Jan 2012 11:37 AM

Threats to global economic growth for 2012 are on the rise, especially due to heightened market volatility stemming from the European debt crisis, says Zhu Min, deputy managing director of the International Monetary Fund.

In fact, the IMF is poised to officially forecast a recession for Europe this year.

"In the past few months, we've observed clearly that economic activity has been weakening, the prospect of growth has dimmed," Zhu said in a speech in Singapore on Thursday, according to CNBC.
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If Europe doesn't contain and extinguish its debt crisis soon, global economic growth could hit only 2 percent in 2012 compared with a previous IMF forecast for 4 percent made in September of 2011.

Volatility roiling global markets isn't helping either.

"Because the U.S. lost its triple-A level rating level and because the global risk portfolio changed dramatically, all the financial institutions are repricing their assets, repositioning their risks, repositioning their balance sheets. We observe the global assets in a massive restructuring," Zhu added.

While many experts are already flying recession warning flags for Europe, some are optimistic that the U.S. will continue growing, although not everyone is so hopeful.

Despite improving economic indicators, such as falling unemployment rates and more robust manufacturing output figures, the U.S. still carries too much debt and will spend this year paying down those debts instead of growing, says investor and author A. Gary Shilling.

"Despite recent stronger economic data, the United States is likely to fall into a recession that will spread globally. The reason? The U.S. has too much debt — and reducing it hurts growth," Shilling writes in a Christian Science Monitor column.

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