The International Monetary Fund (IMF) Wednesday nudged up its forecast for global growth but said the risks to the recovery, particularly the developed countries' public debt and imbalances in capital flows. In fact, the institution has maintained its growth forecast for the eurozone to 1% in 2010, while stressing the fragility of the recovery against the risk of the Greek budget crisis and its possible contagion effects.
In its "World Economic Outlook, the IMF now expects growth of 4.2% against 3.9% estimated in January. The forecast of +4.3% for 2011 is unchanged. In 2009, world GDP had declined by 0.6%.
"The recovery of the global economy has developed better than expected," said Fund.
While advising maintain expansionary policies in 2010, he believes that "many of these countries must also take urgent credible medium-term strategies to reduce public debt and then back to more conservative levels ."The risks associated with foreign states may depress the activity for a variety of reasons," noted the IMF.
"The high ratios of debt (relative to GDP, ie) would hinder budgetary flexibility, lead to higher interest rates in the general economy, increase the vulnerability of economies budgetary difficulties, and compressing the growth," he listed.
Finally, the Fund has called on governments to "repair and reform the financial sector, to end the gaps in regulation, and to" support the creation of jobs and the unemployed, the unemployment rate to remain at around 8.5% in developed countries until the end of 2011.