IMF cuts forecast on second year of Europe contraction

China Forecast

The IMF didn’t change its forecast for China, seen growing 8.2% this year and 8.5% in 2014.

“It’s not the rates that we saw before the crisis, but these rates are long gone,” Blanchard said of emerging countries. “Things in general are fine.”

He also dismissed concerns about “currency wars” raised by Russia last week as “very much overblown.” European policy makers had joined Japan in bemoaning the economic cost of rising exchange rates.

“Countries have to take the right measures to get their own economies back to health,” with measures including monetary and fiscal policies, Blanchard said. “To the extent that we think the policies are appropriate, then the implications in terms of exchange rates are also appropriate.”

In Europe, German growth was cut by 0.3 percentage point to 0.6% in 2013 and is seen accelerating to 1.4% next year, from 1.3%.

Spain Contraction

Spain will contract 1.5% this year, compared with 1.3% in October and is seen growing 0.8% in 2014, 0.2 percentage point less than before.

Italy will shrink 1% in 2013 rather than 0.7% seen in October, and expand 0.5% in 2014, unchanged from three months ago, according to the IMF report released today.

Bloomberg News

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