April 8 - The International Monetary Fund's World Economic Outlook forecasts global growth helped by recovery in the U.S. But the report warns of a bumpy road ahead in emerging markets. Lily Jamali reports.
The IMF's released a global growth forecast that Chief Economist Olivier Blanchard called a 'substantial improvement' over last year's output: SOUNDBITE: OLIVIER BLANCHARD, CHIEF ECONOMIST, IMF (ENGLISH) SAYING: "Put simply, the recovery is strengthening. We forecast real growth to be 3.6% growth this year, 2014. 3.9% next year - up from 3% in 2013." Blanchard said recovery was strongest in the United States, with the U.K. and Germany also positioned well. But the forecast signaled a widening gap among countries, with recovery in more advanced nations serving as a double-edged sword for emerging markets: SOUNDBITE: OLIVIER BLANCHARD, CHIEF ECONOMIST, IMF (ENGLISH) SAYING: "Stronger growth in advanced economies implies increased demand for their exports and that's clearly good for them but the normalization of monetary policy, however, implies tighter financial conditions and what can be described as a tough financial environment." The loosening of monetary policy by the U.S. Federal Reserve has forced emerging markets to brace for impact. IMF economists posted a slight downward revision to its emerging markets projections from its last forecast. Research chief Thomas Helbling says emerging markets are relatively prepared for what lies ahead. SOUNDBITE: THOMAS HELBLING, RESEARCH CHIEF, IMF (ENGLISH) SAYING: "Many Emerging markets are in a stronger position to withstand capital flow reversals - they have more flexible exchange rates. They have greater better buffers in terms of foreign exchange reserves." The conflict between Russian forces and Ukraine is likely to prompt capital outflows from Russia, according to Blanchard. SOUNDBITE: OLIVIER BLANCHARD, CHIEF ECONOMIST, IMF (ENGLISH) SAYING: "Russia has large reserves, they can almost surely face those outflows but it may well decide to increase the interest rate. So for all these reasons, we think this will lead to lower growth in Russia. For Europe's Southern Periphery, the forecast was for positive for the first time in 2 years but despite strong exports: SOUNDBITE: OLIVIER BLANCHARD, CHIEF ECONOMIST, IMF (ENGLISH) SAYING: "Internal demand is still weak. It has to become stronger if the recovery is to be sustained." He said potential deflation on the horizon could stunt growth in the fragile region. Meanwhile the IMF "cut" its forecast for Japan, which has a consumption tax set to expand as the nation recovers from years of stagnation.