ET The International Monetary Fund said the global economic slowdown is worsening as it cut its growth forecasts for the second time since April and warned U.S. and European policymakers that failure to fix their economic ills would prolong the slump.
Global growth in advanced economies is too weak to bring down unemployment and what little momentum exists is coming primarily from central banks, the IMF said in its World Economic Outlook, released ahead of its twice-yearly meeting, which will be held in Tokyo later this week.
"A key issue is whether the global economy is just hitting another bout of turbulence in what was always expected to be a slow and bumpy recovery or whether the current slowdown has a more lasting component," it said. "The answer depends on whether European and U.S. policymakers deal proactively with their major short-term economic challenges."
Meanwhile, German Chancellor Angela Merkel arrived in Greece on her first visit since Europe's debt crisis erupted here three years ago, braving protests to deliver a message of support -- but no new money -- to a country seen by many as a prime example of Europe's ongoing and entrenched economic woes.
Thousands of Greeks defied a ban on protests, gathering in Syntagma square in central Athens as Merkel's plane touched down. Two protesters dressed in German military uniforms waved a red-black-and-white swastika flag and held out their arms in the Nazi salute.
Many Greeks blame Merkel, who is holding talks with conservative Prime Minister Antonis Samaras, for forcing painful cuts on Greece in exchange for two EU-IMF bailout packages totaling over 200 billion euros.
Ahead of the IMF's Tokyo meeting, policymakers have flagged the U.S. "fiscal cliff" -- government spending cuts and tax raises due to take affect early in 2013 -- and resolving the euro area's debt crisis as the top issues facing the global economy.
Europe's debt crisis is "a clear and present danger," Canadian Finance Minister Jim Flaherty said last week.
The IMF forecast that global output in 2012 would grow just 3.3 percent, down from a July estimate of 3.5 percent.
That would make this the slowest year of growth since 2009 when the world was struggling to pull out of the global financial crisis. It predicted only a modest pickup next year to 3.6 percent, below its July estimate of 3.9 percent.
It projected U.S. growth would be a little more than 2 percent this year and next, but forecast a contraction in the euro area this year by 0.4 percent and modest growth in 2013 of 0.2 percent.
Emerging markets are still expected to grow four times as fast as advanced economies, but the IMF took a sharp knife to its estimates for India and Brazil, with the latter now seen growing slower than the United States this year...
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