Hopes for global economic recovery have swelled after the International Monetary Fund (IMF) raised 2009 growth expectations for Asia.
Releasing its latest revisions today, the IMF said it now expects Asia’s developing economies to grow by 5.5 per cent instead of the 4.8 per cent it had previously forecast.
It said the speed of a sustained recovery is now dependent on this growth being mirrored in larger, developed economies but warned that the rebound may still progress slowly. It expects the world economy to shrink by 1.4 per cent this year but return to growth in 2010 with a 2.5 per cent rise.
China’s growth outlook for the year has risen one per cent to 7.5 per cent and India’s by 0.9 per cent to 5.4 per cent. The UK economy is expected to contract by 4.2 per cent this year and grow by 0.2 per cent next, while the US is expected to shrink by 2.6 per cent this year but will grow by 0.8 per cent in 2010.
“The upgrade owes to improved prospects in China and India, in part reflecting substantial macroeconomic stimulus, and a faster-than-expected turnaround in capital flows,” said the IMF. “However, the recent acceleration in growth is likely to peter out unless there is a recovery in advanced economies.”
In the US, “the inventory cycle is turning, and business and consumer confidence has improved,” it said.
But it does not extend this level of confidence to Europe. “Consumer and business survey indicators have been recovering, but data on real activity show few signs of stabilization and thus activity is projected to strengthen more slowly than elsewhere,” it said.
After UK manufacturing output suffered an expected 0.5 per cent decline this week, exorcizing forecasts of a 0.2 per cent rise, Graeme Allinson of Barclays Commercial Bank said the growth in China and India gives cause for optimism despite the disappointing figures here. “Globally, Sterling remains competitive and will act as a supporting stimulus as manufacturing once again finds its feet,” he said. “The increase in both production levels and demand in India and China are a good indication of international recovery, and this can only be good for UK manufacturers.”