Washington: The International Monetary Fund (IMF) has lowered its outlook for global growth over the next two years.
It warned that Europe’s financial crisis and slower expansion in China and India have weakened the world economy.
According to a quarterly update to its World Economic Outlook, the IMF said it expected the world economy to expand 3.5 percent this year, slightly down from its previous estimate of 3.6 percent in April.
The IMF also cut its forecast for global growth to 3.9 percent in 2013, from 4.1 percent three months ago.
It also cut its U.S. growth forecast to 2 percent this year from its previous estimate in April of 2.1 percent.
Speaking in Washington, IMF Chief Economist Olivier Blanchard said threats to the health of the global economy had increased, from the impact of the euro zone, as well as politics in the U.S.
"The main risk is obvious,” The Telegraph quoted him, as saying, adding: "It is that the vicious cycles in Spain and Italy become stronger, that output falls even more than it does."
He said that if either Spain or Italy were to lose access to markets that could "easily derail the world recovery", the report said.
According to the report, he said that European leaders need to ensure that borrowing costs for Spain and Italy do not get so high that they are unable to borrow from private lenders, possibly necessitating another bail-out.
The IMF also warned that the United States could fall back into a recession next year if Congress does not deal with the fiscal crisis.
First Published: Tuesday, September 25, 2012, 19:04