That's the latest outlook of the International Monetary
Fund, which predicts the world economy will expand 4.8 percent this year and
4.2 percent next year. That would far surpass last year's 0.6 percent decline,
the worst since World War II. The IMF's forecast for worldwide growth this year
is 0.2 percentage point more than its previous estimate in July.
The international lending agency predicts the US economy
will grow 2.6 percent this year, below its previous estimate of 3.3 percent,
and 2.3 percent next year.
The IMF's forecast, released Wednesday, points to lingering
weakness in the United States and Europe after the worst recession since the
Great Depression.
The agency says the global economy will require a balancing
act: Countries with huge trade and budget deficits such as the United States
will need to boost exports. And countries with big trade surpluses such as
China must reduce their dependency on exports and boost domestic demand.
A major factor dampening US exports is that China and other
emerging nations have been manipulating their currencies to gain trade
advantages.
Treasury Secretary Timothy Geithner on Wednesday stepped up
pressure on China to make more progress in moving toward flexible exchange
rates. Geithner said it is particularly important to see appreciation in
countries where the currency is significantly undervalued.
Geithner never mentioned China, but his speech at the
Brookings Institute was clearly directed at the world's second-largest economy.
China's economy is still only one-third the size of the US
economy. But the gap is likely to narrow in the coming years.
The IMF prediction of 2.6 percent growth for the United
States this year is historically weak coming after a recession. It marks a
sharp reversal from the 2.6 percent decline in US activity last year. That was
the steepest drop since 1946. The US forecast is down from a 3.3 percent
projection the IMF made in July.
But the US economy slowed sharply in late spring and summer
this year as the European debt crisis shook the confidence of investors and
businesses. The IMF's forecast of 2.3 percent US growth for 2011 is down from
its 3 percent estimate in July.
Growth prospects are even weaker in Europe. The 16 nations
that use the common euro currency will see their economies average 1.7 percent
growth this year and 1.5 percent next year, the IMF says. Still, both those
forecasts are upgrades from July, following a debt crisis that began in Greece
and had threatened to widen throughout Europe.
Growth in Japan is projected to be 2.8 percent in 2010 and
1.5 percent in 2011. Its 2011 estimate was trimmed because Japan is still
struggling to emerge from nearly two decades of anemic growth.
Combined, advanced economies such as the United States and
Europe are forecast to grow 2.7 percent this year and 2.2 percent next year.
By contrast, emerging and developing economies such as those
in China, Russia, Eastern Europe and Latin America, are expected to expand 7.1
percent this year and 6.4 percent in 2011 — more than double the growth rates
of the advanced economies.
Leading the growth surge is China, the world's
second-largest economy. Growth in China is forecast to be 10.5 percent this
year and 9.6 percent next year. Brazil's economy is expected to grow 7.5
percent this year before slowing to 4.1 percent next year.
The IMF said the recovery from the recession remains
vulnerable to threats, including soaring budget deficits in many nations. It
says credible plans to cut deficits are urgently needed.
The IMF's latest World Economic Outlook indicates that more
than 210 million people across the globe are unemployed. That's an increase of
more than 30 million since 2007 before the recession began.
For the global economy to continue growing, the IMF said
advanced economies such as the United States will need to see stronger spending
by consumers and growth in exports.
The administration has intensified its criticism of China
over its currency. Washington contends that Beijing must move faster to allow
the yuan to rise in value against the dollar. American manufacturers contend
that the yuan is undervalued by up to 40 percent, giving Chinese producers a
big price edge over US companies.
A senior Treasury Department official told reporters Tuesday
that the need to reform currency policies would be a big part of the
discussions. The official spoke on condition of anonymity to discuss U.S.
positions in advance of the meetings.
The House, before adjourning for the midterm elections,
approved legislation to impose economic sanctions on countries such as China
that are found to have manipulated currencies to gain trade advantages. The
Senate is unlikely to approve the measure this year. But House passage might
give the administration more leverage with China on the currency issue.
Lawmakers are under pressure to act at a time of high
unemployment in the United States. More than 8 million people lost their jobs
during the last recession, and the unemployment rate remains stuck near
double-digit levels.
