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In its September 2011 update of the World Economic Outlook, the IMF lowered its global real GDP growth forecasts to 4.0% for 2011 and 2012, down from its June 2011 estimations of 4.3% for 2011 and 4.5% for 2012. Growth has significantly weakened in advanced economies due to financial strains caused by the fiscal crisis in the eurozone and the USA. In developing and emerging countries, growth remains solid but should moderate due to weaker external demand and capacity constraints.
The IMF forecasts that the global economic growth will slow to 4.0% in 2011 and 2012 in real terms, down from 5.1% in 2010 as downside risks to global growth have increased. These risks include the sovereign debt crisis in key advanced economies and insufficient policy action to address the crisis, signs of overheating in emerging and developing economies, the volatility in commodity prices and the rise in geopolitical tensions. Real GDP in advanced economies is forecast to grow modestly at 1.6% for 2011, compared to 6.4% in the developing and emerging world.
Growth has slowed significantly among advanced economies due to rising financial instability as well as the on-going problems of weak domestic demand and high unemployment. The advanced world is facing the risk of a renewed recession, unless economies in the eurozone can resolve their sovereign debt crisis and the USA has a credible plan to reduce its reliance on debts. Developing and emerging economies will continue to lead global economic growth but at a slower pace as external demand weakens given the slowdown of major advanced economies. In addition, correcting capacity constraints, building social safety nets and rebalancing from external to internal demand remain challenges for these economies to sustain their growth momentum.