IMF lowers outlook for global growth.  On 26 September, the International Monetary Fund (IMF) published its World Economic Outlook (WEO), which assesses the current developments in the global economy and the growth prospects for this year and 2002.  While presented two weeks after the terrorist attacks in the United States, the published outlook does not reflect the impact of the 11 September events.  But even despite the omission of the clearly negative impact of the attacks on the global economy, the prospects for global economic growth have weakened significantly since the publication of the last WEO in May 2001, when the IMF projected global output growth for this year at 3.2% and 3.9% in 2002.  Amid lower growth projections for almost all regions, the IMF has cut the forecast for world output growth this year by 0.6 percentage points to 2.6% and for 2002 by 0.4 percentage points to 3.5%. 

Significant downward revisions to US and Europe.  According to the IMF, economic activity is slowing in almost all regions of the globe, accompanied by a sharp decline in trade growth.  In fact, the world trade volume is seen expanding by just 4.0% and 5.7% in 2001 and 2002 respectively.  The delayed recovery in the United States has prompted the IMF to lower its projection for 2001 by 0.2 percentage points since May to 1.3%.  The new figure is down from a 4.1% GDP expansion last year and would place annual growth at its lowest level since the 1991 recession.  Moreover, the Fund has revised its previous assessment that the slowdown in the United States will be short-lived and has revised its growth forecast for 2002 by 0.2 percentage points from May of this year to 2.2%, which signals that growth is likely to remain at a decade low next year.  The U.S. slowdown had a greater-than-expected impact on the Euro Area, for which the IMF reduced its outlook by 0.6 percentage points for 2001 and 2002 to 1.8% and 2.2% respectively.  Lower business and consumer confidence spread quickly from the United States to Europe, prompting a sharp weakening in domestic demand growth, particularly in Germany.  However, the IMF remains upbeat about the prospects for a mild recovery in Europe as the likelihood of adverse oil and food price shocks lessens, inventory adjustments are being completed, past over-investment is worked off and the IT sector recovers. 

Table 1: Overview of WEO Projections for World and Major Regional Aggregates

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