IMF raises 2011 GDP estimates

The IMF raised its forecast for global economic growth this year, reflecting stronger US output based on tax-cut extensions, while emerging nations lead the recovery.

The world economy will grow 4.4 per cent, more than the 4.2 per cent expected in October. Expansion next year is projected to reach 4.5 per cent, unchanged from October, the IMF said today in an update to its World Economic Outlook report.

“The world economy is recovering, but it is a two-speed recovery,” IMF chief economist Olivier Blanchard said in comments posted on the fund’s website. “Our forecast is that next year growth will be roughly the same as this year. That’s not going to be able to make a big dent to unemployment.”

While a faster-than-expected second half of 2010 helped put the world on a stronger foothold this year, the IMF warned that risks to its predictions remain “elevated.” It pressed euro-region governments to build a comprehensive plan to prevent sovereign-debt “financial stresses” from spreading out to other countries and urged emerging countries to closely watch the rise of asset price bubbles as inflation risks increase.

“In advanced economies, activity has moderated less than expected, but growth remains subdued,” the IMF said in the report. The institution said that in “many emerging economies, activity remains buoyant, inflation pressures are emerging, and there are now signs of overheating, driven in part by strong capital inflows.”

The IMF in a separate report today said that financial conditions have improved, with equity markets and commodity prices rising. It also warned that global financial stability is not assured yet.